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ISSUE 8.23 November 2011

Banner year ahead as brokers bounce back

Clive Kirkpatrick

 Brokers are set

for a triumphant turnaround in 2012 thanks to a little help from the Reserve Bank of Australia “Great advice” and “great service” could help make 2012 a banner year for struggling brokers, if a recent RBA-induced surge in mortgage demand is enough to overcome borrower reticence for buying property. MPA Top 100 brokers have reported a surge in customer enquiries following the Melbourne Cup day rate cut, and newly-

appointed St.George head of broker Clive Kirkpatrick has said the outlook for 2012 is good for the mortgage market. “As a bank, we think we’ll see another move down in interest rates, which would be positive,” he said. Kirkpatrick indicated that he expects many states which suffered through market downturns in 2011 to begin to see a turnaround in 2012. “Queensland, you would think, is about to turn around. Brokers in Queensland who have been through some hard times might be getting rewarded late into 2012. South Australia is quite stable, and WA, too, I think is just about

Top broker named

to come forward on the back of the resources boom,” he said. Business has already surged forward for WA-based broker Warren Dworcan of Rate Detective Home Loans in Osborne Park, who said he has seen a significant spike in enquiries and leads since the recent cash rate reduction. “Fortunately, we’ve probably seen – and this is a big call – almost a threefold increase from a month or two ago,” Dworcan said in early November. Refinancer interest has been piqued by the move, while firsttime buyers may also find the market easier to enter. “As soon as rates start moving, people naturally become curious about what’s out there,” Dworcan said. While it was too early to identify a pattern of enquiries as a result of the cut, Dworcan said that he had seen enquiries from a variety of borrower profiles. “Because it hasn’t been long enough to judge it, all I can safely say is there’s been a massive increase in enquiries and leads coming through in all areas,” he said. Fellow MPA Top 100 broker Peter Ellis of Oxygen Home Loans said he had also seen a marked increase since the rate cut. “I send an email update to my client database after the Reserve Bank meet every month. Whenever there is a change to the cash rate, the volume of reply that I receive increases significantly,” Ellis said. Page 16 cont.


MPA’s Top 100 puts Melbourne broker on top Page 2

New segments Citi brokers to follow segmentation trend Page 4

CU comeback Credit unions regain confidence in brokers Page 6

Inside this issue Analysis 20 EDRs: Injustice for all? Opinion 22 Time to change sales tune Insight 24 When to hire… and fire Market talk 26 Our interest rate future Toolkit 27 Rainbows and the ‘cloud’ People 28 Latest movers & shakers Caught on camera 29 PLAN takes it to the top


News Melbourne supplies MPA top broker Melbourne-based adviser Mark Davis has topped MPA’s Top 100 Broker list after settling a staggering $170m of home loans in 2010/11. That phenomenal figure – an all-time Top 100 record – saw Davis edge Sydney pair Jeremy Fisher ($131m) and Justin Doobov ($122m) into second and third respectively. Davis recently scooped the Australian Broker of the Year Award at Key Media’s 10th annual Australian Mortgage Awards, based on his exceptional performance during the year. Former ANZ employee Davis only set up The Australian Lending & Investment Centre two years ago and attributed his meteoric rise to sheer hard work. “I do 80 hours a week and if I only did standard hours I wouldn’t complete half of that number,” Davis said. “I put a massive amount of effort and hours into each and every client whereby I have been known to spend 15 to 20

hours on one client if there is a particular need to do so.” In fourth was Raymond Xue of ACA Mortgage Solution, who recently won a state award from aggregator AFG for his business’s performance. The Top 10 also featured Ruan Burger of Home Loans Etc, Rael Bricker of House & Home Loans, Rate Detective’s Warren Dworcan, Develop & Invest’s Andrew Brumby, as well as stalwarts Katrina Rowlands of Mortgage Success and Mortgage Solutions Australia’s Colin Lamb. Davis previously told Australian Broker the business was on a fast growth trajectory, and was aiming for a lending target much, much higher than what he had achieved. “Our goal is to take the business to writing a billion dollars a year over the next three to four years,” he said. Davis said focusing on high income earners had been key to his success, as is his passion for broking. “I know what clients want, and what they need. I’ve probably

MPA’s Top 10 1. Mark Davis, Australian

Lending & Investment Centre 2. Jeremy Fisher, 1st Street Home Loans 3. Justin Doobov, Intelligent Finance 4. Raymond Xue, ACA Mortgage Solution 5. Ruan Burger, Home Loans Etc 6. Rael Bricker, House & Home Loans 7. Warren Dworcan, Rate Detective Home Loans 8. Andrew Brumby, Develop & Invest 9. Katrina Rowlands, Mortgage Success 10. Colin Lamb, Mortgage Solutions Australia

some cases that’s only a few hundred dollars, but in others it can be several thousand dollars if it is a substantial property,” he said. Reibelt has called for lenders to agree on a panel of approved valuers, making valuations transferrable between lenders. “There needs to be a central register of approved panel valuers that lenders can call upon for valuations, and where a value produced for one lender could be used by others, with some minor update in the instructions to the valuer if needed,” he said. Reibelt claimed lenders were often “paranoid” about brokers influencing valuers. He said a deal shifted from one lender to another could find a valuation rejected, even if it was performed by a valuer



been working it for about 10 or 15 years. I really live and breathe it, I work on it every day, and I want to improve all the time, so I suppose those attributes don’t come unless you are really passionate about what you do,” Davis explained.

‘Muddy’ valuation rules slammed A central registry of valuers should be created to stop borrowers having to pay for multiple valuations, a top broker has argued. Graham Reibelt of Oasis Home Loans, a finalist in the AMA Non-conforming Broker of the Year category, has commented that there is a growing problem of valuations being rejected for deals when there is a change of lender during the approval process. Reibelt pointed to experiences in which a deal was shifted from one lender to another, and a previous valuation was rejected by the new lender, racking up significant costs for borrowers. “Time and time again we see clients paying for additional valuations sometimes only a week after another valuation has been conducted via another lender. In

already on the lender’s panel. “There are lenders who are fearful of the influence a broker may have over a valuer and because of this will never use a valuer who has previously valued a property, even if that valuer is on their panel. There are also lenders who will insist on a valuation being done, and then conduct their own enquiries with estate agents in the local area and err to their opinion instead of the valuers,” Reibelt said. The expense of this can become significant for borrowers, with Reibelt pointing to a situation where a borrower had to pay for three separate $1,000 valuations. He urged reform of the valuation industry, and said its current structure led to “muddy and potentially expensive” scenarios.


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Australian Broker is the most-often read industry publication, according to independent research carried out by the Ehrenberg-Bass Institute for Marketing Science at the University of South Australia in December 2008. The research also found that brokers rate Australian Broker as the best for both news content and feature articles, followed by sister publication MPA. Overall, on all categories, Australian Broker ranks top followed by MPA. The results were based on a sample of 405 respondents who were the subject of telephone interviews.

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Segmentation next as Milburn joins Citibank Citibank will take the wraps off a new broker segmentation strategy in coming months, following the appointment of new head of broker distribution Aaron Milburn.

Aaron Milburn has joined Citibank as head of broker distribution, departing Bankwest

Exiting his role at Bankwest where he was head of broker sales, Milburn has been charged with growing Citibank’s broker application volumes, which

Citibank head of mortgages Vibha Coburn flags imminent segmentation strategy

account for 80% of its business. Citibank head of mortgages Vibha Coburn said a key aspect of Milburn’s role will be to bring to market a premium broker service, the shape of which is still being finalised. “Something I identified when I came on board was that we would like to offer a premier broker service,” Coburn said. “We will begin by trialling that with a few key brokers in the market.” Coburn said a segmentation of the bank’s third party agents in the market made sense, as it would essentially mirror its approach to directly-sourced customers. She added it would also serve to cement the relationship that brokers had with the bank, and would assist in boosting loan volumes and conversions. “Brokers want to be confident that they will

get a decision within a certain time and in a certain manner,” she said. “If they can have that promise, the broker will feel comfortable with us. It builds the trust, respect and confidence that they have with us,” she said. Citibank has seen a 2.4 time increase in its application volumes year-on-year, with Coburn saying that Milburn will play a key role in managing similar growth in 2012. “Aaron has been in the market for a while, and is well known among key aggregators and brokers,” Coburn said. “He has a track record in growing business, so he is a good addition for our strategy.” Matthew Wood, who was acting head of distribution this year, will step back into his former role as key account manager for Citibank, where he will focus on strategy development.

No ‘dancing girls’, but Adelaide to put brokers centre stage Adelaide Bank has launched a rebranding campaign which aims to promote its role as an intermediary-based business. The bank recently launched a “new look and feel” website, and general manager of third party lending, Damian Percy, said the site will promote Adelaide Bank as a distinct brand from its Bendigo Bank retail arm, and one that is exclusively the domain of intermediaries. “The new website is the first step in pushing the brand out there with the very clear advocacy for advicebased banking. The call to action throughout the website is ‘Adelaide

Bank is great, mortgages are great, let’s all buy houses. Would you like one? Speak to your broker’,” he said. Percy explained that the merger between Bendigo and Adelaide had seen Bendigo take on retail duties and Adelaide become the “exclusive domain of our intermediary cash and lending business”. He said this distinction had previously not been made overt through the company’s branding, but that the rebranding launch would see Adelaide “refreshing the brand”. “We’re not going out there and having roadshows and dancing girls and elephants. It’s more, ‘Let’s rebuild the website and speak to

clients about the benefits of mortgage broking’,” he said. The current launch of the rebrand sees consumers urged to speak to a mortgage broker generally. The bank may also begin recommending specific brokers for specific client needs. “It’s a staged approach,” Percy explained. “We didn’t want to come out with the end state right away. The plan is to progressively get to the point where we either push them to things like the MFAA to put them in contact with a local broker, or where we recommend an individual or group of brokers that we know have the right experience.”

The bank is also building a new portal for its broker partners, and is close to completing an upgrade to its online banking system for consumers. Percy said the rebranding efforts will set the bank apart as a brand exclusively for the use of third-party intermediaries, though he conceded there was a risk involved in this position. “We’re still working on the assumption that when the client goes to the broker, they’ll get the genuine broking experience. That means there’s no obligation for that broker to recommend an Adelaide Bank product. That’s the risk you take to support the channel.”



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CUs gain confidence through distribution deals Mutuals are beginning to lose their wariness of the broker channel as more begin opening themselves to third-party origination. Connective has announced it will open credit union products to its broker network after adding Phoenix Mortgage Management to its lender panel. The move comes after aggregators Choice and PLAN struck similar deals with Phoenix, and Phoenix chief executive Allan Willoughby has said the developments represent mutuals’ growing confidence in the broker proposition. “I think as time goes by and more loans are originated through the broker channel, that confidence

grows. That’s a good thing. It’s a good source of distribution for mutuals and for brokers, so it’s a win-win,” he said. Connective head of sales Michael Goerner said the addition of Phoenix to the aggregator’s panel presents an opportunity for brokers to provide clients with a stable alternative to banks, and to tap into growing consumer awareness of the mutual sector. “Credit unions have a reputation for providing borrowers with competitively priced mortgages and through this essentially keeping the traditional lenders honest. They have created a strong and loyal customer base and remain a stable

source of funding for Australians,” he said. Willoughby agreed, and commented that brokers could now appeal to borrowers who were “anti-bank”. “There’s definitely a segment of the market that are just over the banks, and they’re looking for a safe alternative. Credit unions give brokers the opportunity to offer that safe alternative,” Willoughby said. Phoenix currently originates loans through credit union association CUSCAL, which provides liquidity and securitisation to a number of credit unions. However,

Willoughby said the company was seeking to work directly with credit unions to originate balance sheet funded Allan Willoughby products. “At the moment it’s just restricted to this program, but what we’re looking to do is engage with other credit unions and expand to them. We’re looking for other credit unions who want to have access to the broker channel, but who don’t have the experience or knowledge. We’ll be the conduit for those that want to access brokers,” he said.

Back to brokers, as Heritage seeks growth Heritage Building Society is coupling its rebranding as a bank with a plunge back into widespread mortgage broker distribution. The mutual has announced it will begin distributing through mortgage brokers nationwide from 1 February next year. The move will follow the mutual’s rebrand as Heritage Bank on 1 December. Heritage general manager of retail services Paul Francis conceded that the company had – like many mutuals – pulled away from broker distribution during the GFC. However, Francis said Heritage had maintained relationships with its broker network, and had eyed a return to the channel as soon as it became economically viable. “The high costs of funding during the GFC meant that a number of financial institutions

abandoned the broker network. We faced the same situation, but Heritage decided to scale back rather than pull out entirely, because we recognised the importance of maintaining our broker relationships. We subsequently ramped up our broker channel offerings as soon as we could after the GFC, and we are now expanding our reach across the country,” he said. The mutual previously distributed through brokers in Queensland, NSW, Victoria and SA. In broadening its distribution nationwide, the company said it was responding to “significant demand”. Heritage said it would add extra staff to manage the expansion. Francis said the company would expand via its existing aggregators and broker partners.

“We have been lending via those aggregators in Queensland, NSW, Victoria and South Australia for a long time, and we will now simply expand into the other states via those partners,” he said. Francis commented that the expanded distribution would help Heritage ramp up lending outside its Queensland “heartland”. “We are keen to grow our lending and improving our geographic reach through our broker channels will do that,” Francis explained. The move by Heritage follows the addition of credit union products to the panel of PLAN, Choice and Connective via Phoenix Mortgage Management. Francis commented that there is a growing trend among mutuals to return to the broker channel. “Heritage has been active in the broker market for almost 15 years,

so we realised a long time ago that this is an extremely important part of the market. Others now seem to be coming to that same realisation. We’re proud that we have developed and maintained our broker relationships throughout that entire period and look forward to building on them in future,” he said.

Paul Francis


News Sampson departs Provident as Platinum goes resi Provident Capital’s head of lending distribution Steve Sampson has left the business for a retail role at Citibank, with managing director Michael O’Sullivan assuming his responsibilities. Well known to the industry as the broker face of the non-bank lender, Sampson is to be involved in setting up a business called ‘Citi at Work’ for the global banking institution. Speaking with Australian BrokerNews, O’Sullivan said Provident would not recruit a replacement for Sampson until next year, and until then he would oversee the business. “We do see that we will have somebody in that position, but at this point in time we are reasonably comfortable with the way things are moving,” O’Sullivan said. “Steve did a great job while he was at Provident. However, the brand is bigger than just the

individuals, and so it is really just business as usual for us,” he said. The business is focused on rolling out its revamped Platinum product, which is now available to clients looking to purchase or refinance residential investment property. “This is quite a significant change for us. Until November, the Platinum product was only available for non-Code regulated loans, but we’ve opened that up to the residential property market,” he said. O’Sullivan said the product was a “true non-conforming low-doc offering”, and that third-party demand had driven the widening of the product for residential clients. “Simply, there was a very strong demand from brokers for the product, particularly for residential investment property. Because of that demand, we looked at the changes that we needed to make, and decided

Steve Sampson has left Provident Capital for Citibank, where he will head the new ‘Citi at Work’ business there wasn’t too much change required,” he said. Provident has flagged opening the Platinum product up for other Code-regulated residential purposes in March next year. O’Sullivan added that volumes

MD Michael O’Sullivan now heads Provident broker distribution until a replacement is appointed in 2012 for the business at present are lower overall than those historically experienced – particularly the times prior to the GFC – but the business had seen the traditional upticks at the end of the financial and calendar years.

Infinitive the new face of Pisces Pisces businesses have been given a new moniker, following their acquisition by investors. In August Pisces and Newsnet businesses were acquired by Santapu Limited, when the launch of “a range of new financial services products” was promised. The business, which provides a suite of mortgage software services for mortgage brokers, including CRM and electronic lodgment capabilities, has now been rebranded as Infinitive. The business said that the rebranding, which includes related marketing and messaging business Newsnet, would “provide one unified brand in the marketplace”. In addition, the company stated these businesses continued to

perform under the new ownership and were delivering “healthy revenues” through both new and existing clients. Speaking with Australian Broker, Infinitive CEO Jega Rajan said the decision to change the brand was taken some time ago, but it was only now being communicated to the market. He added that the Pisces Group shell company had been put into liquidation by its owners, but all of its assets – the entire business – had been acquired by Santapu in August. Rajan said the business was set to launch a new service in the personal finance space in coming weeks – – which will offer mortgages direct

to consumers via the web. The site’s catch-cry is ‘The Borrower Strikes Back’. Both the business and consumer divisions will be focused on developing innovative new products and services, according to Infinitive, as it seeks to revitalise customer experience. “Our mission is to become a household name and a partner companies will trust to power their business objectives,” Rajan said. “We believe our fresh, flexible and yet determined approach will make us a force to be reckoned with.” Commenting on the brand change, Rajan said it was important to create a parent brand that reflected the nature of the

Jega Rajan

business, especially its ‘innovation’. “It also needs to be able to grow as we ready for a major launch into the Australian personal finance market,” Rajan said. “We believe Australian consumers are ready for a brand that believes anything is possible with the right attitude and approach,” he said.



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Job growth slowing, but not collapsing

Mortgagees buoyed by RBA cut

Job ads fell for the fourth consecutive month in October, with economists predicting that any pickup in unemployment would be moderate. Recent figures from the Australian Bureau of Statistics show the unemployment rate has remained steady, sitting at 5.2% in October. However, the ANZ Job Ads series has indicated job advertisements decreased 0.7% for October, representing the sixth fall in seven months. In light of the figures, ANZ has forecast the unemployment rate to continue to rise, hitting 5.5% by mid-2012. The bank predicted that jobless numbers would plateau by the middle of next year, with the expected boom in mining investment propping up employment. In spite of the decline, ANZ head of Australian economics and property research Ivan Colhoun said the drop-off in job ads has been gradual. “The decline in job advertising to date is very moderate, more like the slowing in 1996-97 than the collapse in advertising witnessed during the GFC in 2008-09,” Colhoun said. This moderate decline will be

Consumer confidence has seen a major boost due to the Reserve Bank’s move on interest rates. The Westpac Melbourne Institute Index of Consumer Sentiment rose 6.3% in November following the Bank’s 25bp cut to the official cash rate, and mortgage holders proved most buoyed by the RBA’s decision. Westpac chief economist Bill Evans said the jump in confidence was “clearly driven” by the rate move. “The significance of the rates decision is apparent from the breakdown in responses by home ownership. Confidence amongst those folks who have a mortgage soared by 13.9%; people who own their house mortgage-free boosted their confidence by 6%; while tenants’ confidence actually fell by 6.8%,” Evans said. The uptick in consumer sentiment follows an 8.1% increase in September, when the RBA backed off its previously hawkish stance. Evans said the Index had reached its highest level since May 2011, but still sat 6.7% below its level last year. “That is even after the Index had fallen by 5.3% in response to the rate hike in November last year,” Evans said. The rate cut also seemed to bolster consumer confidence in the future of the Australian economy. The sub-index tracking expectations for economic conditions over the next 12 months rose by 18.8%, while expectations

arrested by the commodities boom, BIS Shrapnel has predicted. The company has forecast unemployment to fall below 4.5% by 2013–2014, but managing director Robert Mellor said the jobless rate should remain around current levels for the near future. “I think we’re in a flat period and we won’t see any clear trend developing until we see strength in the economy. It will bump around a bit without any clarity for a while,” Mellor said. Unemployment should begin to head downwards next year, Mellor predicted. He said the gradual pickup in jobs should see the Reserve Bank considering rate hikes again. “Whilst a lot of us feel things are pretty soft at the moment, the impact of the mining boom and a modest pickup in retail and housing should be enough for the RBA to say we don’t need another rate cut,” Mellor said. “I think the next three to four months that’s the way we will continue to see the numbers come through. It will be six to nine months before we see a clearer downward trend. When signs of that appear, we would expect the Reserve Bank to move back to a bias towards tightening.”

for conditions over the next five years rose 7.4%. However, respondents were less optimistic about their own financial future, with the Index’s component tracking views on family finances over the next 12 months falling from 98.1 to 97.3. “Ongoing concern about respondents’ future finances is likely to pose headwinds for future spending patterns,” Evans said. Sentiment towards housing saw an increase following the rate cut, with the proportion of respondents indicating it was a good time to buy rising 6.5%. In contrast, sentiment towards purchasing a motor vehicle was down 3%. Despite the lift in sentiment, Evans contended that global economic developments could still take a toll on the Australian economy. He predicted the RBA would follow its Melbourne Cup Day cut with further rate decreases. “Our interpretation of the Bank’s recent Statement on Monetary Policy is that it is troubled by developments in Europe and, due to a more downbeat assessment of the domestic economy, sees clear room to cut further. Developments overseas, as we saw in 2008, have the potential to move the next cut forward to December but, for now, our call remains that the next move will be 25bps in February with a further 50bps in cuts over the course of 2012,” he said.

Credit appetite rumbling, but mortgages off the menu Consumer credit demand has taken a turn upwards, but mortgage demand remains weak. Veda’s quarterly Consumer Credit Demand Index shows a 2.4% year-on-year rise in the demand for credit for the three months to September. The rise was driven by a 4.4% year-on-year uptick in personal loan demand. Head of consumer risk at Veda, Angus Luffman, said the results showed a recovery in credit demand after major declines following the GFC. “Overall, the demand for new credit is trending upwards year-on-year since the huge falls of 2009.The result for September is also significant in seasonal terms. Historically, the trend is for consumer credit demand to fall in

the September quarter following the end of financial year. This result shows the fall from the June quarter of -6.5% is the smallest on record since tracking began in 2004,” Luffman commented. Mortgage demand, however, continued to decline. Home loan enquiries fell for the seventh consecutive quarter. Demand for mortgages was down 6.7% year-onyear and 9.2% quarter-on-quarter. However, the year-on-year decline for the September quarter was the lowest rate of decline since the March 2010 quarter. Western Australia proved strongest in the upward trend for consumer credit demand, recording a 14.9% year-on-year rise in demand for credit cards and a 10.3% year-on-year rise for

personal loans. Luffman said the result showed a turnaround for the state. “Western Australia had by far the strongest growth in year-onyear demand for new credit. The state also improved on its flat performance in the 2010 September quarter. The turnaround signals a marked improvement on the 2009 September period when it recorded double digit year-on-year falls in personal loans and credit card enquiries,” he said. However, WA was unable to buck the national trend of

dwindling mortgage demand. Home loan enquiries saw an 8.3% year-on-year decline in WA. Tasmania saw the most marked decline in the demand for mortgages, with enquiries falling 11.2% for the year. The state was followed by Victoria and ACT, which both posted a 10% decrease in mortgage demand.


News New Diploma opens gateway to fee-for-service The new Diploma minimum requirement for brokers who are MFAA members could pave the way for fee-for-service businesses, according to Intellitrain. New government education standards for Cert IV and Diploma courses are set to come into effect from 24 November, and Intellitrain has said new courses offered as part of its Diploma program will help brokers offer a better service proposition to their clients. The changes set to come in will see the educator’s Diploma

course expand from two days to three days, and will add a course in assisting customers with budgeting and finances. Intellitrain CEO Paul Eldridge told a broker webinar the additional training could help brokers introduce a fee-for-service. “We know that 70% of Australians don’t know how to budget. On day three you’ll learn how to educate your clients how they can be better with their money. If you are providing this kind of extra value to clients, then

Flashback: Brokers in dark on November Diploma deadline As part of an ongoing upgrade to MFAA membership education standards, the peak industry body’s members are required to have completed their Diploma of Financial Services by 30 June 2012, which marks an upgrade from the previous Certificate IV minimum. However, the National Finance Institute’s Peter Heinrich has said that the market’s brokers are unaware that November will see the introduction of new government standards for both the Cert IV and Diploma courses – and if brokers are not enrolled before this date they will need to sit the full Diploma. “The message is that if they have a Cert IV, they should really be trying to get the Diploma before November to allow them to take advantage of the current structure,” Heinrich said. “If they do it after that, they’ll have to do the whole Diploma course.”

that’s a service you could introduce in your business as a fee,” he said. The course will offer students budgeting tools to give to their clients. Eldridge said educating clients in budgeting could also help brokers better adhere to responsible lending practices. “In responsible lending, you have to determine affordability, not serviceability. You have to determine if a person can actually afford the loan you’re giving them? To determine that, you have to look at their budget and see where their money’s going,” Eldridge said. “Now you can actually give your clients coaching and assistance in that area, and give them the tools to manage it. This is something you could potentially start to charge for.” Brokers who have already enrolled for or received their Diploma will not have to take the updated courses, but Eldridge argued many could benefit from the additional training. He said the courses would still be open to interested brokers who had already earned their Diploma. “It will show you how to

Paul Eldridge

transition from just a practitioner or someone who’s good at writing loans to someone who knows how to grow their business,” he said. Eldridge told the webinar’s participants that Intellitrain would release pricing for its new Diploma program soon. He contended that while the program will be more expensive than the current Diploma, brokers will see more value from the courses. “The new one will be a few hundred dollars dearer, but you actually get three days, and you should come out of it actually learning how to make some more money,” Eldridge said.


News THE COALFACE Sebastian Scurria, Better Choice Mortgage Services A patchy market is not making the Perth market easy, but Better Choice’s Sebastian Scurria is finding diversification, and the location of business relationships, makes a big difference. Speaking to Australian Broker, Scurria said it really depends on which suburb you are talking about when it comes to defining how well the Perth market is performing for brokers. “If you have referring agents in the suburbs doing well – and we do – then your broking business will be doing well,” he said. Scurria said that due to a continued influx of immigrants from England and South Africa who want a house “five minutes from the beach”, the Northwest coastal suburbs of Perth were doing well. “The further flung suburbs east of the city are very quiet; the market there is very ordinary,” he said. Having a diversified business across residential, commercial

and equipment is also helping Scurria to weather the market downturn. “We’ve always diversified – we cater for all of a client’s different financing requirements,” Scurria said. “There are some people who pitch for solely residential, commercial or equipment finance business, but the only thing we don’t do is personal loans – a flat market is challenging, and three forms of finance are better than one,” he said. The equipment finance portion of the Better Choice business – which accounts for about 10% of revenue – has been “buoyant” due to the impact of the mining boom. The rest of the business is 65% residential and 25% commercial. Scurria said some of his loan writers are busy, while others are quiet. Commenting on the growing trend towards charging a fee for service, Scurria said its success in Perth could be different from that of the rest of Australia, due to the “price sensitive” nature of the market. “WA is the most price sensitive market with regard to any good or service, and I shudder to think how the market would react if we charged a fee. We have no plans to go down that track at this point in time.”

Fixed rates could dive below 6% Fixed rates are continuing to track below variable rates, even in the wake of the RBA’s official rate cut. ING Direct has announced further cuts to its fixed rate product suite, bringing its three-year rate to 6.19% and its one- and two-year rates to 6.09% at time of printing. With fixed rates continuing to undercut variable rates, ING Direct head of broker distribution Mark Woolnough has predicted that rates could go even lower. While Woolnough could not forecast ING Direct’s future fixed rate moves, he commented that fixed rates below 6% were not unlikely. “We’re very close, and in terms of driving competition and driving activity in a slow credit growth environment, lenders are looking at how they can price attractively and sensibly, in the shorter term more so than in the longer term. From a psychological

perspective, five-point-something – even if it’s 5.99%, compared to six-point-something – is a very nice number,” he said. Woolnough said the products are growing in popularity even following the rate cut. Despite the ensuing variable rate reductions from lenders, Woolnough said borrowers still felt a degree of uncertainty about the rate outlook. “It’s difficult for the customer to pick [where rates will go], and it comes to the point where they say they’re comfortable,” he explained. Woolnough said “a good chunk” of the bank’s application volumes continue to come from fixed rate products. Woolnough touted the flexibility of the bank’s fixed rate loans, compared to many other fixed rate products. “One of the benefits is the customer can make up to $10,000 a year in additional repayments,” he said.

Fixed rate freefall Lenders have continued to jockey for position in the fixed rate market. Westpac’s regional brands, including St.George, BankSA and the newlylaunched Bank of Melbourne, have cut rates up to 26bps across their fixed rate range. The move brings the brands’ two-year fixed rate to 6.14%, and its three-year fixed rate to 6.24%. Citibank made cuts to its fixed rate offering, dropping its three-year rate by 26bps to 5.99%. The bank has now racked up 133bps of cuts to its fixed rate products since July. Suncorp has also claimed an ‘unbeatable’ rate of 6.15% for its one-year intro fixed rate, with two- and three-year fixed products below 6%.

Get used to ‘life in the slow lane’: APRA Banks must come to terms with “life in the slow lane”, APRA has warned. In the regulator’s annual report, APRA chair John Laker warned banks that they will have to readjust their expectations for growth in light of weakened consumer credit demand. He remarked that consumer wariness was likely to continue in the face of global economic turmoil. “The cautious attitude of households and businesses in Australia, which will be reinforced by recent global developments, will very likely deny ADIs the strong volume growth that supported a sustained period of profit increases before the crisis,” Laker said. Banks and shareholders alike may have to adjust to lower returns on equity. Laker said banks could find themselves tempted to “chase unrealistic expectations by assuming more risk” through relaxing credit

standards or aggressively cutting costs. “Those temptations must be resisted in favour of more measured strategic ambitions,” he said. Laker referred to a letter the regulator sent in August to the boards of major banks, urging them to scrutinise lending standards to ensure credit criteria were not being sacrificed for the sake of growth. He said the letter intentionally targeted large ADIs as the industry’s “standard-setters”. “If these lenders choose to lower lending standards to win business, smaller competitors may feel they have little option but to follow. APRA received the assurances it sought. The decision to write such a letter to, and seek specific assurances from, boards rather than management was designed to have boards question the lending practices of their institution more deeply than

they might have been doing,” Laker said. The regulator will also continue to closely scrutinise the banking sector in light of continuing turmoil in global economic markets. “In its 2010 report, APRA said it was not ready to reduce the intensity of its supervision from crisis levels because of the uncertainties then prevailing. That stance may have seemed unduly cautious as 2010/11 unfolded, but APRA’s continued close oversight of the strategies, risk management systems and capital positions of institutions has been vindicated by recent developments. The crisis is entering what the International Monetary Fund has described as a ‘dangerous new phase’ and APRA will need to maintain the intensity of its supervisory and policy activities in the current year, and possibly beyond the current year,” he said.

What APRA told the banks • Weakened credit demand here to stay • Shareholders should expect lower returns • Lending standards should not be lowered • APRA will maintain supervision intensity



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Economic headwinds Broker doubles income unlikely to abate: CBA with GoPrivate Next year is unlikely to see the heralded return of credit demand according to heavyweight mortgage lender Commonwealth Bank. In an address to shareholders at the bank’s annual general meeting, CBA chairman David Turner said the global headwinds which had seen credit growth weaken in 2011 were unlikely to be abated in 2012, and predicted that much of the sluggishness that has characterised the past year will continue into the next. “While the 2011 financial year has been characterised by subdued system credit growth and intense competition, there is nothing to suggest that the 2012 financial year will be much different. Fundamentally, it comes down to confidence, and it is confidence that will encourage both individuals and corporations to invest for growth,” Turner said. The Eurozone debt crisis and slow recovery in the US continued to impact Australia, Turner indicated, and Australian banks were “not immune to the vagaries elsewhere in the world”. He predicted wholesale markets could again see funding pressures mount. “Ongoing offshore instability continues to impact the domestic economy, and this has the potential to place further upward pressure on wholesale funding costs for domestic banks.” Commonwealth Bank posted record profits during the year despite these conditions. The bank saw its cash net profit after tax rise 12% to more than $6.8bn. Turner touted a productivity and efficiency drive as key to replicating the results in a shaky

economic environment. “Against this backdrop, we will continue to operate in a disciplined and prudent manner. We will maintain a focus on driving productivity initiatives, and these will deliver sustainable improvements in business performance to provide superior returns to shareholders,” Turner said. Outgoing CBA chief executive Ralph Norris also highlighted global economic challenges, and said the bank would have to improve customer satisfaction and the number of products per customer. “In an environment of constrained credit growth and tighter margins, improving the service we provide to our customers and earning more business from them will be one of the key drivers of future growth,” Norris said. Norris commented that during his tenure as CEO, the bank’s number of products per customer had grown by 20%, and was the highest among the majors.

Geraldton-based mortgage broker Brian Taylor has managed to double his income in two years by diversifying into a private real estate sales business that cuts out estate agents. Branded ‘GoPrivate’, the business advertises properties for private vendors both online and at a shopfront, as well as supplying the necessary do-it-yourself ‘for sale’ materials. Taylor said he saw an opportunity to diversify into private sales and boost his business income because of its close alignment with his existing mortgage and finance business. “What concerned me was the way banks were cutting commissions, and it was becoming harder to earn a living. A lot of guys like me were suffering,” Taylor said. “So I was looking around for alternative income sources, and insurances weren’t providing us with anything worthwhile, so I asked myself – what else can I do?” GoPrivate charges vendors $800 upfront for an open-ended listing and sales materials, as well as $1,000 when the sale is achieved. Taylor said he is making $6,000 a week in GoPrivate income, which goes towards paying other business expenses including rent and reception. Taylor said he also assists interested buyers with finance, and in doing so, acts as a vetting service for vendors, as well as their “close ally and friend” during the purchase process. Taylor said overall, the response from vendors has been positive.

“We have people satisfied with what they have achieved. Of course there are a few disgruntled people, with property not selling at the moment. But no one is doing any business, so they may as well take the decision to reduce the price and sell it themselves rather than pay a real estate agent,” he said. Taylor said that “location is everything” for the business, which operates out of a “cabin-like” office right outside Geraldton’s post office front door, where the passing trade is “enormous”. The business is also aligned to five other websites, which means people looking for property on the internet can find themselves on the website, where they can search by location. GoPrivate was so successful for Taylor that he purchased the business in May this year, and is now in the process of launching franchise opportunities for other mortgage brokers. “I’m drawing up franchise agreements for other franchisee brokers to reap the benefits of their efforts. It worked well for me, so I don’t see why it wouldn’t work for them,” he said.

Genworth to offload Australian stake via IPO Genworth’s US-based parent company will sell a large stake of the Australian mortgage insurer to offset financial losses. The initial public offering of Genworth Australia will see a 40% stake in the company offered on the ASX. The IPO is being pursued to release capital for the LMI provider’s American parent company following a decline in net income for the financial year. “Genworth plans to pursue a minority IPO of its Australian mortgage insurance business in the second quarter of 2012, subject

to market conditions and regulatory review and approval. This move is part of a broader strategy to rebalance the business portfolio, support future growth opportunities for the Australian business with expanded access to the capital markets, maintain control positions of strategic mortgage insurance platforms in Australia and Canada, and together with other actions, free material capital for redeployment,” the company said in a report. The offering is expected to incur a tax charge of up to $80m for the

Australian business. Genworth’s American operations saw net income fall from $83m in the September quarter of 2010 to $29m in 2011, while expenses rose from $29m to $104m in 2011. Genworth’s Australian LMI business, meanwhile, saw better results than its American counterpart, with new insurance written up 4% for the quarter. While new LMI was down 3% year-on-year, the company said the mortgage market was showing improvement from increased refinancing activity. The business

was also hit with a $16m “unfavourable” tax charge. The Australian arm of the company also saw a 4% decrease in operating earnings from the prior year, which it put down to increased delinquencies. Genworth also pointed to the Queensland floods and the “continued pressure on certain consumers and small business owners from the combined impacts of higher interest rates, increased living costs, currency valuation and lower consumer spending” for a 10% rise in the company’s loss ratio.


Commercial simpler than you think: Sintex Most brokers can’t believe how simple vanilla commercial lending can be, and can easily add this new income stream to their home loan business, it has been claimed. Sintex general manager Cathy Dimarchos said even ex-bankers are often surprised by just how easy the more simple commercial deals can be to add to their traditional home loan business. “The trick with commercial is that, if you don’t bite into the $20m deals, they are not going to

Cathy Dimarchos

be that complex. It will be your retail shop, or your hairdresser, or your small medical centre. These deals are very basic and you can get them across the line without too much trouble.” Sintex previously opened up distribution of its loans to holders of ACLs direct, expanding outside of wholesale funding. Dimarchos said the response from brokers has been strong. “It is generally the brokers who are looking to diversify, who want to offer different options and solutions. It’s imperative they do this, particularly in the current market,” she said. Focusing only on ‘vanilla’ deals, excluding development and construction, Dimarchos said that Sintex is a lender that suits brokers looking to ease into commercial deals. “If they stick to simple deals, there is about the same amount of work involved in a commercial deal as in a home loan, and you also often get a home loan on the back of that, which increases your income stream,” Dimarchos said.

According to Dimarchos, it has been “drummed into brokers for years” – no longer accurately – that commercial business was more difficult than residential. “I’m finding that brokers are now questioning whether it is as difficult as everybody says, particularly as there are more options now other than the banks,” she said. While the banks are offering short-term bill facilities of up to five years, Dimarchos said that in contrast, non-bank lenders are providing more competition by offering long-term facilities. She said that while the headline rate may be higher than the banks, consumers need to be “enlightened” that there are benefits to sourcing credit through a non-bank. Sintex aims to offer originators and aggregators a platform through which they can “increase their customer base, diversify their income stream, and have their brand names associated with commercial mortgages”, according to the group.

Sintex launches ‘X8’ campaign Sintex has launched a campaign on its ‘X8’ product, a commercial full-doc with a borrower fixed rate of 7.99% available for a term of 1–3 years. Available for loans settled before 27 February 2012, general manager Cathy Dimarchos said the offer signalled businesses’ confidence in the strength and growth of the commercial sector over the next 12 months. “We’re giving originators and aggregators the chance to drive their businesses forwards by offering quality commercial loans under their own brand name and logo,” Dimarchos said. “We have just recently extended the program by offering our products to the broker network, who have their own ACLs. By doing this, customers who utilise the broker network can gain access to our products instead of being driven back to the banks with short-term funding.”


News Renewed consumer curiosity from borrowers regarding borrowing capacities is also evident, with Mortgage Choice seeing its ‘How much can I afford to borrow?’ online calculator seeing a 357% increase in weekly page visits the week of the RBA’s move.

Buyers hesitant, but better positioned

Whether these enquiries represent increased mortgage volumes, however, remains in question. The recent Commonwealth Bank/ MFAA Home Finance Index indicated that only 16.9% of respondents are planning to buy

Greg Wells

a property in the next 12 months. In spite of this wary view of the property market, potential buyers are in a stronger financial position. More than a quarter of respondents said they were saving more than 20% of their take-home earnings. The result was up from 21.8% who said they were saving in January. Mortgage stress has eased as well. In September, even before the RBA rate cut, 78.3% of the survey’s respondents said they were easily meeting their mortgage repayments. MFAA chief executive Phil Naylor said the poll showed consumers were in a position to act when confidence in the housing market returned. “With a recent interest rate cut, high savings and low mortgage stress, prospective homebuyers are in a relatively good position. “Reticence about buying property seems linked to the perceived state of the economy, not to the personal financial state of consumers,” he suggested. Regardless of consumer reticence, those borrowers looking to enter the mortgage market in the year ahead may show even greater reliance on brokers, Greg Wells of Wells Partners has said.

The rate cut means a more complex mortgage environment for consumers as lenders try to trump one another with increased discounting. This complexity makes the broker proposition even more appealing, Wells said. “This probably presents an opportunity for mortgage brokers. We’ve already had one lender who only passed on 20bps of the cut instead of the full 25, and there’s discrimination out there between new clients and existing clients. This only enhances the broker proposition, where consumers are trying to navigate these new prices,” he said.

NCCP’s silver lining

The changing perceptions of consumers is another potential bright spot for brokers heading into 2012. While some brokers have decried regulatory changes brought about by the NCCP, Kirkpatrick said they could actually lead to better volumes. “I’ve come from RAMS, where as a non-bank we had to be ready for NCCP six months before the major lenders. We implemented the NCCP environment, and we actually saw an uplift in volumes,” he said.

Peter Ellis

Ultimately, the fate of brokers in the year ahead will be largely driven by an adherence to quality, Kirkpatrick said. While 2011 saw regulatory changes drive many brokers from the industry and falling volumes made life difficult for many others, Kirkpatrick expressed optimism that quality brokers can see good returns in 2012. “If you’re giving great advice and great service, you’re always going to get demand. The good ones will get stronger, and those that are not as good will self-select to leave the industry or the customer will select for them,” Kirkpatrick said.

Carbon tax labelled vote Home loan numbers for expensive housing mask weak demand The building industry has slammed the Senate’s move to pass the carbon tax legislation, claiming it will increase the cost of housing. In the wake of the Senate’s vote on the legislation, which passed 36-32, Master Builders Australia claimed the government and Greens “have voted to increase the cost of housing” in passing the legislation. The association said independent modelling showed the cost of a new house will increase by at least $5,000 under the tax. “The new tax could not come at a worse time – there is a serious undersupply of new housing and households, and new homebuyers are struggling with worsening housing affordability and increased cost of living pressures – the now legislated carbon tax will only put them under more housing and cost of living stress,” the group’s CEO Wilhelm Harnisch said. The carbon tax will cause the building and construction industry to lose up to $3.6bn in 2020, Harnisch argued. The Housing Industry Association added to criticism of the tax, with CEO Graham Wolfe

claiming it would add thousands of dollars to the cost of a new home. “In the majority of instances, new homebuyers will be unable to discern how the tax correlates to the carbon footprint in the building materials and products they select in their new homes,” Wolfe said. The HIA expects that the tax would impact on “thousands” of home building materials, and said homeowners would feel its impact for years. “Unlike its impact on average weekly household expenses, the carbon tax is added on to a mortgage in one large lump. The homeowner continues paying for the tax for years – over the course of their home loan,” Wolfe said. Wolfe echoed Harnisch’s concerns about the tax’s impact on housing supply. He claimed housing stock would dwindle due to higher costs faced by builders. “Independent research indicates that housing stock will be reduced by up to 16,800 homes due to the higher costs. This is a very unfortunate consequence of the carbon tax and will add to the existing undersupply of housing in Australia,” he said.

Housing finance edged up in September, but a housing group has claimed the result masks weak demand for new homes. Recently released ABS data showed a 2.2% seasonally adjusted rise in owner-occupied housing finance. Master Builders Australia chief economist Peter Jones, however, said the figures also indicate a continuing decline in new housing finance. “The key finance indicator released by the ABS shows that demand for new dwellings remains flat, despite a rise in the headline figure. Loans for construction of dwellings and purchase of new dwellings, combined, fell in September and remain down on the same month a year ago,” Jones said. The ABS data shows loans for the construction of new dwellings fell 0.2% in September, while loans for the purchase of new dwellings declined 0.7%. The rise in owner-occupied finance was driven by a 2.6% increase in loans for the purchase of established dwellings. Jones said the housing figures, which pre-dated the RBA’s

November rate cut, showed “consumer caution and overseas events” undermining recovery. He stated that further action from the RBA could be necessary to sufficiently stimulate demand. “The November rate cut will help but Master Builders believes the Reserve Bank needs to do more to boost confidence and encourage an upswing in housing,” he said. Without such an upswing, Jones predicted rising rents and diminishing housing affordability. “A sustained recovery in housing is critical because Australia-wide the residential market is underbuilding and undersupplied. If the residential building industry remains in the doldrums, it will be unable to meet the serious housing shortage that has arisen, risking higher rents and prices as more and more people chase less stock,” Jones said. A bright spot in the ABS data was its indication of increased first homebuyer activity. First homebuyer commitments as a proportion of total housing finance rose to 16.4% in September, up from 15.4% the previous month.



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Refinancing has more Housing overhang equates to a long eight takers in Sydney: Poll months A glut of housing stock is approaching previous record levels, and would take nearly eight months to clear. RP Data has reported that housing stock is currently piling up, with 7.4 months of effective supply on the market. Research analyst Cameron Kusher said that sales volumes remain at around the same level as last year, which indicates that supply levels have been driven by higher levels of stock rather than declining sales. “A spike in recent listings data acquired by RP Data suggests that available stock is at near-to record levels and is being driven by mounting levels of re-listings. This result is indicative of slower market conditions and longer than normal selling periods,” Kusher said. Kusher suggested that stock levels may have peaked in some capital cities, particularly in Perth. Perth was the only capital city to record a month where the supply figure was lower than at the same time last year. “The fact that Perth and Western Australia’s effective supply levels are now lower than they were at this time last year suggests that the market may be starting to recover after underperforming for

much of the past five years,” Kusher said. However, housing stock continued to grow in Melbourne and Adelaide. Kusher said that stock overhang in Melbourne is set to grow further, as sales volumes continue to slow after a run-up in value growth. He indicated that, while he expects the recent RBA rate cut to see improved sales volumes, this is unlikely to filter through to property value growth. “My reasoning behind this is that while housing credit growth remains flat, consumers show low levels of optimism when it comes to property purchases, and retail trade continues to be slow; at a macro level the property market is likely to be subdued until we see a significant reduction in the number of homes for sale,” Kusher said.

Sydney property owners show a greater propensity towards refinancing than their Melbourne counterparts, a recent survey has indicated. The poll, conducted by HSBC, showed that 85% of Sydney property owners believed they could get a better deal by refinancing. The result compared to only 26% of Melbourne respondents who thought they could save money by refinancing their mortgage. The survey also found that 80% of Sydney mortgage holders knew their current home loan rate, and 76% knew the amount of fees they paid on their mortgage. Key to the survey’s result could be the difference in median dwelling prices for the two cities. HSBC Bank Australia head of mortgages Alice Del Vecchio said the higher median house prices in Sydney could result in borrowers being more aware of their mortgage options. “Having a larger financial commitment means that home loan rate payments and fees are front of mind for Sydney borrowers. Being more sensitive to interest rate changes, Sydney borrowers clearly see the benefit of shopping around for their home loans,” she explained. Del Vecchio said the survey still indicated that many borrowers in

both Sydney and Melbourne were unaware of the possibility of securing a better deal through refinancing. “Customers don’t seem to realise that now is an optimal time to consider refinancing. It is a highly competitive lending environment right now and banks are working really hard to win borrowers’ business,” she said. Del Vecchio urged borrowers to consider their refinancing options, and to educate themselves thoroughly before jumping into making a decision. “Have a clear idea why you want to refinance – whether it is to simply get lower rates or to take advantage of a loan’s features, research the home loan market online and see what rates are available,” Del Vecchio said. HSBC announced last year it had no plans to distribute its mortgages via brokers, and the bank has instead focused on its online channel. The company launched its Homeloanwork refinance portal in September, and Del Vecchio said it had seen strong uptake. “Since Homeloanwork’s launch, we have had a 75% increase in online enquiries from last year, reflecting strong consumer demand for refinancing and the importance of an online refinance guide,” she said.


Move over, there’s room for one more The IMBA, AMBA and MBABC will just have to make room for one more industry association in the Canadian mortgage broking industry, with a new provincial mortgage broking association focused on promoting tighter regulation. The MBAAC – Mortgage Brokers Association of Atlantic Canada – is a completely independent association, according to its newly enfranchised president Glen Ward. “We launch next week and will draw membership from not only mortgage brokers but lenders, insurers – basically anybody who is a part of our industry,” Ward said.

Part of the group’s mandate is to grow the number of those regulated mortgage professionals across the Atlantic region. Currently, only Ward’s province – Nova Scotia – as well as Newfoundland license brokers. New Brunswick and PEI are being encouraged to move in the same direction, although many brokers in all four jurisdictions want to see the industry more tightly regulated. “Currently there is no educational component to licensing in any of the four provinces,” said Ward. “Our goal, as an association, is to provide a voice for the industry with government regulators.” In other parts of the country, potential conflicts between brokers and their lenders are now stirring calls for a national association with an exclusively broker membership. MBAAC opted not to go in that direction.

UK brokers could fill bank advisor gap A lack of mortgage demand in the UK is leading to banks cutting back on front-line advisors, which commentators argue is a great opportunity for independent mortgage brokers. Openworks’ Paul Shearman told Mortgage Solutions in the UK that the reality was some banks are only doing enough mortgage business in branch to justify one advisor between two or three branches. “I think there is a huge opportunity for brokers here,” he said. The comments came after Mortgage Solutions reported on a report on bank branch advisors that found via an undercover sting

operation that only five out of 37 bank advisors gave ‘good advice’. The rest failed in areas including obtaining a fact find, assessing attitude to risk and explaining customer rights. Shearman said that around 50% of bank advisors were indicating they were unlikely to get a diploma or level of qualification that they would need in 14 months’ time, which could actually be a spur for mortgage brokers to branch into new areas of financial services. “Some of those advisors will say, actually I don’t want to do investments and pensions anymore, and many will consider making a transition to the mortgage and protection markets. “There are a lot of advisors that are going to be leaving the full financial planning space so there are opportunities for brokers who want to try out new areas too,” he said.



First homebuyers dominate enquiries First homebuyers are dominating mortgage enquiries, with Loan Market having seen enquiries from this segment hit its highest level in nearly two years. The company’s COO, Dean Rushton, said first-time buyers accounted for 51% of total Loan Market enquiries in October. Enquiries from first-time buyers were strong across all states and territories, with first homebuyers in Tasmania representing 71% of enquiries. “After a few years of hibernation, first homebuyers are back and are now the dominant section of the market for enquiry,” Rushton said. The group put this down to more favourable rates and softened prices. Loan Market’s claims echo figures released recently by AFG. The aggregator saw a 40% spike in first homebuyer activity in its most recent monthly mortgage index, with first-time buyers accounting for 16.4% of all loans processed by the company.

Vow takes wraps off legal service Vow has officially launched a conveyancing and legal service for its brokers, after touting the move for several months. The aggregator’s chief executive Tim Brown outlined the launch of Vow Legal at the company’s September conference in Fiji. Brown said it will continue to provide the company’s brokers with diversification opportunities. Vow Legal will be managed by Astill Legal Group, and will provide brokers with services relating to self-managed super funds, wills, estate law, relationships law and conveyancing. It is expected to aid brokers in complex property deals, allowing them to track them online. Approvals down, home loans up Building approvals took a hit in September, while home loan demand edged up slightly. ABS figures showed a significant drop-off for building approvals led by a massive decline in dwellings excluding houses. Private sector dwellings excluding houses fell 30.7% for the month, seasonally adjusted, erasing the impact of a 1.1% rise for house approvals. The impact of the fall in dwellings excluding houses saw the total number of dwelling approvals decline. Total dwellings approved fell a seasonally adjusted 13.6% for the month. The decline followed a 10.7% rise for August. Owner-occupied loan numbers were up slightly by 0.7%.

Non-conformer offers loan guarantee Non-conforming brokerage Oasis Mortgage Group is putting money on its ability to secure a deal in more challenging client scenarios, with the launch of a $250 approval guarantee for brokers. To run to the end of 2011, the guarantee applies to brokers who submit a non-conforming loan application. If accepted, and Oasis is unable to secure an approval, it will pay the broker $250. Director Graham Reibelt said Oasis has over 200 specialist lenders who are “keen for business”, and anything it could do to stimulate the sector was a “win-win”. Reibelt said non-conforming brokers need to be solution-focused, and adapt a different mindset. Homeloans moves below RBA Non-bank lender Homeloans used the RBA’s latest rate move to lower rates on its own products by up to 40bps. Homeloans announced it will cut rates on its MoniPower product by 40bps, while lowering rates on its Ultra Plus and ProSmart products by 35bps. The change will bring the rate on the company’s Ultra Plus product to 6.54%, while its MoniPower loan will drop to 6.84%. Homeloans general manager of sales Greg Mitchell urged brokers to consider the company’s products as a “first choice alternative” to major lenders, saying the rate cuts gave brokers even more reasons to use the lender’s solutions.

RAMS could join online discount flock RAMS could challenge NAB’s UBank in offering discounted mortgages online, it has been reported. According to the Australian Financial Review, the Westpac subsidiary will launch online deposits early next year to compete with the high-interest offerings of ING Direct, RaboDirect and UBank. St.George chief executive Rob Chapman indicated that the brand could eventually roll out discounted mortgages on its online platform. “It will be so flexible that we will be able to tweak it to fit our strategy,” Chapman told the AFR. The RAMS deposit product has been trialled among Westpac staff, and Chapman indicated the company’s strategy would be to become the primary financial institution for customers. Business confident amid tough conditions Businesses are showing renewed optimism despite declining conditions. A NAB business survey has indicated that business conditions weakened in October, undoing much of the rise in conditions from the previous month. The bank said the result was indicative of “an economy that is treading water at present”, with declines in employment conditions, profitability and trading conditions. The conditions index is now seven points below its long-term average. In spite of the decline in conditions, business confidence strengthened for the second consecutive month due to positive rate speculation. Investors blamed for tight Queensland rental market Low investor participation is seeing vacancy rates in the sunshine state tighten. The Real Estate Institute of Queensland has reported vacancy rates in Queensland have fallen in the September quarter. The organisation said five local government areas in the state recorded a vacancy rate of less than 2% in September, up from just two at the end of June. REIQ managing director Dan Molloy said weak investor participation was behind the tightening vacancy rates. “The number of investors in Queensland continues to be below historical averages. What this means is that there is not the usual number of investment properties being added to the overall rental pool, which is putting a strain on supply,” Molloy said. The REIQ said the Reserve Bank rate cut, along with soft property prices, could begin to woo investors back.



Injustice for all? Lawyer Matthew Bransgrove believes the greatest risk of the NCCP may not be the courts’ interpretation of the regulations, but rather the power it gives to EDR schemes

W Matthew Bransgrove

ASIC pushes EDRs as the best means of resolving disputes, and prohibits NCCP-based disputes being brought to court. In RG 139, the regulator states: “Commencing legal proceedings in relation to a complaint or dispute lodged at EDR creates the potential for scheme members to undermine the EDR process. There is also the possibility that the same complaint or dispute will be dealt with in two competing forums, wasting time and resources”.

hat has been overlooked in the NCCP – and is of enormous importance – is the arbitrary power given to external dispute resolution providers. Here I speak of COSL and FOS. Their terms of reference have recently been grossly widened by the publication of Regulatory Guide 139 (ASIC-approved EDR schemes). The effect of these rules is to oust the jurisdiction of the courts from dealing with the enforcement of mortgages. This is a very strange and unusual state of affairs in the free world. The fundamental underpinning of a free society is the respect for and enforcement of the rights of property and the person through the law courts. Over hundreds of years, checks and balances have evolved to safeguard the rights of property and person. One of those checks is the restriction of judicial power to the courts and the restriction of the exercise of judicial power to within the framework of the principle of precedent and the right of appeal. Together, the exercise of judicial power through courts applying earlier decisions, and enforcing precedents through the right of appeal, has resulted in the law being fixed and known. This means that instead of the fate of a person’s rights or property being subject to the arbitrary whims of a Commissar, they are instead determined through the application of the fixed and known law. Rights are determined by a judge who, instead of deciding on the basis of what he thinks is fair, is instead a mere technician applying that already laid down and predictable law. By contrast, under its terms of reference FOS, for example, does not deal with complaints on the basis of the law, but rather on the basis of what in its opinion is fair in all the circumstances. Students of history will remember that wherever a person has been asked to determine property and personal rights based on what in their opinion is fair in all the circumstances, rank injustice has always followed. A state of affairs where property rights are determined according to what is fair by an unknown, unjudicial figure is abhorrent to the basic tenets of the rule of law. The Australian Constitution recognises this principle in article 71, where it states that the judicial power of the Commonwealth is to be vested in federal courts. Based on this it would seem clear that powers assumed by FOS and COSL at the behest of ASIC are unconstitutional. In its terms of reference FOS says that in deciding in what is “fair in all the circumstances” it will have regard to legal principles. This is hardly sufficient, especially

when it is only one of four criteria it says it will use. After all the Soviet show trials of the 1930s had regard to legal principles. Unlike an open court, where everything said and all evidence presented is available for scrutiny and rebuttal, FOS allows the complainant to “provide information” and request that it not be given to the party being complained of. This smacks of the old Star Chamber, where those facing punishment were not allowed to know what the evidence against them was. The result of all this is that all lenders, with perhaps the exception of the major banks, will find lending a very uncertain thing to do. The anxiety grows for lenders when they become aware that, unlike the courts which must uphold property rights, FOS in its terms of reference, grants itself the power to forgive debts, release security or rewrite contracts. This is already causing many private lenders to exit the market. As more and more lenders have their mortgage enforcement tied up in these arbitrary processes this trend will continue. The exit of lenders from the market is not just a question of competition; it is also a question of liquidity. The credit markets will remain tight and perhaps even grow tighter if non-bank lenders are scared away by Australia preventing mortgage lenders to access the courts to uphold their property rights. The most significant danger then of the NCCP is not its eventual interpretation by the courts, but rather the ousting of the courts’ jurisdiction to hear mortgage matters at all.

ASIC’s EDR terms of reference require: • That legal proceedings by scheme members should not be commenced where a complaint or dispute has been lodged with the scheme unless the legal limitations period is about to expire; or there is a test case situation • That, where a scheme member commences legal proceedings in a test case situation, the scheme member should pay the complainant’s or disputant’s legal costs • That, where legal proceedings related to debt recovery proceedings have already commenced and a complainant or disputant takes their complaint or dispute to an EDR scheme, the member is not to pursue the legal proceedings beyond the minimum necessary to preserve its legal rights


Review What a difference a year makes … or not. Australian Broker reflects on the punditry, breaking news and trends that made headlines in the magazine 12 months ago Australian Broker Issue 7.23 Headline: Third party market share to skyrocket (Cover) What we reported:

At last year’s LIXI conference in Sydney, industry analysts claimed mortgage broker market share, which had hovered around 40% for some time, was set to climb significantly. Fujitsu Consulting’s Martin North said brokers could eventually see up to 50% of the market flowing through the third party channel, while NextGen.Net sales director Michael Murphy predicted brokers could corner up to 60% of the market within the next five years. Industry analyst Tony Crossley was more conservative in his assessment, saying it would require a “different market” for broker market share to “take off”.

What’s happened since:

Broker market share has yet to make the stratospheric moves predicted at last year’s LIXI conference, but it has risen slightly to sit at 43%, according to this year’s JP Morgan/Fujitsu Australian Mortgage Industry report. In spite of the rise in market share, profitability did not improve for brokers. The report indicated that broker commissions were around two-thirds of their pre-GFC levels, and said that market power had shifted from brokers to lenders. RBA documents report that broker market share could feel downward pressure from NCCP regulations and tighter lending requirements.

Headline: Mortgage brokers swamped after rate rises (page 2) What we reported:

Following last year’s Melbourne Cup Day rate rise and the ensuing flurry of out-of-cycle moves by banks, the MFAA indicated that its members had been inundated with enquiries from borrowers looking to refinance. Timothy Murphy of Menzies Financial Group confirmed that he had received a higher-than-usual volume of enquiries, some of them disgruntled over the banks’ rate moves. He said the interest rate environment was “bad for business”.

What’s happened since:

Another Melbourne Cup Day, another rate move. This year, however, the Reserve Bank granted borrowers some breathing room with their 25bps cut. The majors followed suit, but NAB chose to pass on 20bps rather than the full 25, inciting the fury of Treasurer Wayne Swan. The new interest rate environment is forecast to lead to a jump in home loan activity, with Mortgage Choice reporting a 357% increase of traffic to one of their online mortgage calculators.

Headline: ASIC exit fee guidance welcomed (page 12) What we reported:

ASIC last year released industry guidance on exit fees, helping to define what constituted unconscionable charges for early exit of a home loan. The regulator said lenders could only seek to recover actual establishment, third party and administrative costs, rather than recouping marketing or product development costs or pursuing lost profit through the charges. Carrington National CEO Gino Marra and Gadens Lawyers senior partner Jon Denovan both welcomed the guidance, with Denovan saying it struck a fair balance between consumer and industry interests.

What’s happened since:

ASIC’s exit fee guidance was very quickly rendered moot by the onset of the government’s banking reforms. Following out-of-cycle rate hikes from lenders, the government and consumer groups targeted mortgage exit fees and deferred establishment fees, claiming they unfairly locked borrowers into uncompetitive deals. The fees were banned as of 1 July this year. Industry reaction was almost uniformly negative, though the industry seems to have calmed somewhat in the intervening months, with most non-banks and smaller lenders welcoming the challenges posed by a post-DEF environment.

Headline: LMI ‘no bar to refinancers’ (page 14) The Insurance Council of Australia last year fired back at broker criticism that lenders mortgage insurance represented the highest barrier to refinancing. The industry body claimed that LMI did not deter borrowers, and defended LMI for its ability to help borrowers with a small deposit buy a home sooner. The Council also argued against the idea of transferable LMI, saying the policy could not be transferred as it covered the lender rather than the borrower.

LMI remained a source of controversy through the Senate banking inquiry and the discussion on the government’s banking reforms. Part of the government’s reform package was a mandatory fact sheet on LMI, allowing consumers to compare quotes, including the difference in premiums and rebate schedules. However, Treasury advised against making LMI portable between lenders, as it would require great expense and complex administration, and benefit only a few borrowers.



Beware false economies in the finance game Saving your business money can be critical in a tough finance market, but it can also be a trap brokers fall into, argue the directors of Port Finance Being a broker trying to make a decent living, there are traps you can fall into in the name of saving money that are actually costing you money. Being directors at Port Finance has given us insight into these ‘false economies’. Here are a few: 1) Save time The single greatest resource a broker can have is time. If a broker spends too much time writing up loans or doing paperwork, they are not using their time efficiently. As soon as you can, employ someone to process your loans. Your time is better spent getting new referrers on board or looking after existing referrers. 2) Invest back into your business We see many brokers that don’t invest back into their business. They don’t put on support staff. They spread themselves too thin and don’t service their clients well enough and end up losing some. By trying to save a buck they are actually costing their business enormously in the long run. Our advice is to divert a decent percentage of your revenue back into your business so that your staff and systems really help look after your clients. 3) Look after existing clients Around 20% of your business will be referred to you from your

existing clients. This is a large chunk of your income. Never forget to look after your existing clients. Whether it be a bottle of wine at Christmas time or a birthday card, any gesture will make sure you are top of mind next time their friends or colleagues bring up the topic of loans. A relatively small investment in this group of contacts can reap large rewards. 4) Move out of home Many brokers work from their homes in order to save money. Although moving to an office is an additional expense, you will find that the motivation and drive that an office environment gives you will more than pay for itself. Consider sharing an office with a colleague or rent a space with a group of other sole traders. You’ll find that just working around others will create numerous opportunities for you. Who knows, the guy that runs the local café may just be your next customer. 5) Take care of your referrers Referrers are gold to your business. Look after them. They are sending the bulk of your business to you. Don’t try to save money by skimping on them. Find out what your referrers really like and make them happy. Are they into golf or fishing or perhaps red wine? Whatever it is, ensure your gifts are appropriate and personalised. If they think you care, they’re more likely to care about you and your business. Andrew Baker, Voula Kotsiras and Anthony McDonald (pictured below) are the directors of Victoria-based aggregation group Port Finance

Change your tune from ‘We gotta sell, sell, sell!’ KC and the Sunshine Band may have sounded good singing about sales on a beach in Puerto Rico back in 2000, but as Kym Dalton argues, it was always going to end badly STOP! Stop selling mortgages: stop it now. There is any number of definitions of ‘selling’. It could be defined as the act of persuading a prospective customer that buying the product or service would benefit them. It could be defined as influencing demand your way. A darker interpretation could be that selling is the art of shifting product, maybe reliant upon information asymmetry. I cut my teeth in the freewheeling, unregulated days of the finance companies a few decades ago. We were trained to ‘upsell’ – look for pockets of equity or disposable income and turn that into interest. We thought we were being trained to sell. Obviously what we were crudely trained to do was to be predators. Move forwards in time to the year 2000 and a beach in Puerto Rico and the ‘sales conference’ of the mortgage division of a major (foreign) bank. They had KC and the Sunshine Band appearing and performing one of their hits, however they’d changed the words to “We gotta sell, sell, sell!” It was so obvious that this was going to end badly. This company blew up in 2007 during the subprime mess; ultimately they, too, were desensitised into becoming sales-focused predators, feeding the machine.

Mortgages bought or sold? I would venture that under any of the above definitions, ‘selling’ a substantial, long-term, often complex financial obligation is not what our industry does or should do. A mortgage isn’t a consumable item – it’s not ‘bought’ for its own intrinsic merit and it should not be ‘sold’ for the gratification of a need or a perceived need. The concept of ‘selling’ a mortgage runs contrary to the requirements of the NCCP – it’s right there in the language. Brokers provide ‘credit assistance’; they don’t influence demand or encourage consumption, two concepts inherent in the selling of a product. In the future, brokers should sell their skills and experience, their accessibility, their neutrality and their commitment to their fiduciary duty towards achieving the most suitable outcome for their clients. Confucius said: “The superior person understands what is right; the inferior person understands what will sell”. So right now, brokers need to focus on what is right and stop selling mortgages. Remember: The future isn’t what it used to be. Kym Dalton


FORUM Fee-for-service has received the thumbs down from many brokers sceptical of its impact on commissions, following Intellitrain’s endorsement of the model (New Diploma a gateway to fee-for-service, 14/11/2011) A fee for service really isn’t a good idea; why do you guys keep spruiking it? Lenders will reduce commissions if the industry as a whole starts charging fees to clients. I for one will keep my services free to my clients and my business will grow quicker than someone who charges fees – I guarantee it! bradq on 14 Nov 2011 09:32 AM Hi bradq. Each to their own, and yes your business may grow quicker (depending on what you measure to prove this), but will it be more profitable? That’s the big question. You can have 5,000 clients to make x, and someone else could make the same money with only 3,000 clients; less stress, less staff, less drama. That doesn’t mean their way is any better than yours – just different. Lenders won’t reduce commissions if a fee is charged. Over the last three months we have seen more lenders come back to the broking market and we have seen some lenders (including the majors) actually put commissions up. Ozboy on 14 Nov 2011 10:04 AM Ozboy, you are spot on. Feefor-service has nothing to with commissions and yes, lenders are starting to recognise the value of brokers. Will people please learn the NCCP rules and regulations? – a broker can charge a fee now but must it must be fully disclosed. Paul Eldridge is right in this article; a lot of brokers could do with further training, but you may not need a revised diploma to achieve that, just get in and get trained . countrybroker on 14 Nov 2011 10:35 AM I don’t know why we continue to talk about fee-for-service without getting wholesale rates from banks. We should be able to offer far cheaper rates, with advice and charge a fee, rather than selling the same product as customers can get at a branch. The broker business was built on cheaper rates and low-doc loans, something that the banks didn’t offer. bcoombs on 14 Nov 2011 11:10 AM

Likewise, when Australian BrokerNews asked online readers for their take on fees and commissions, it was far from unanimous (Will fees kill commissions? 4/11/11) Well, this is the banks’ utopian broker business model isn’t it? How they expect us to refer business to them for zero return is anybody’s guess. This would just kill off the broker industry and that’s exactly what the majors want. The most disappointing part is that other lenders

that rely on brokers such as ING, AMP and the non-banks would probably just price fix their commissions, citing all the usual clichés that we have become accustomed to. After a successful 10 years in this industry, it’s very hard to imagine I will be in this industry in 10 years’ time, or even five years’ time. As someone stated last week, it’s all smoke and mirrors. Broker on 07 Nov 2011 01:08 PM Now here is a novel way of doing business. Should commissions be under threat, why don’t we set up a system of auctioning loans to lenders. So we take an application from a client (satisfying NCCP fully) and then we auction this application to the lenders. So they have to pay us a fee to take the deal. So the better the deal and the better the presentation, the better the auction fee we could receive. This gets around the blame game of lenders saying we put up rubbish and get paid too much. It cleans up the industry – we have to put more work into maximising the quality of the deal. derekmiles on 08 Nov 2011 12:17 PM Keep calling it fee-for-service and it will replace commissions but at a much lower premium and therefore drive most of us out of business. Fee-for-advice or some terminology that is acceptable to the legalistic among us gives an entirely different perception. Duncan on 09 Nov 2011 05:09 PM After being in the broker/mortgage manager space for nearly 20 years, I feel the fee-for-service model will kill the broker/mortgage manager industry unless we get a (unique) discounted rate from lenders to allow us to charge the borrower a commission (which they do not like paying) so we can trade off a better rate for the fee. But I would prefer it stays as is; the lender pays commissions, then we can (try to) keep the majors from their market dominance which is not necessarily good for borrowers, as we all know there are better options/rates and much better service around David on 15 Nov 2011 11:03 AM

Poll: Will industry fee-forservice kill commissions once and for all? With the discussion around industry fee-for-service heating up, will an industrysponsored move kill commission revenue? We asked online readers what they thought.

41% Yes

41% No


Unsure Source: Australian BrokerNews Poll date: 4/11–15/11/2011  To vote in our latest online poll or get involved in our forum, visit our home page at



When to hire… and fire

Hiring, and occasionally, firing can be critical decisions for small broking businesses looking to maximise growth. How can you make the right decisions?


he biggest cost for many small businesses is staffing, so the hiring decision is crucial.” That’s the advice from Kellie Rigg, general manager of HR consulting at recruitment agency Randstad. Speaking with Australian Broker, Rigg said that small businesses need a more robust approach overall to recruitment – precisely because of the impact it will have. 1) Understand your business: The first step in hiring a new candidate is to understand the culture of your own business, and the types of skills, abilities and behaviours you need. According to Rigg, this is something that businesses often don’t take time to do. Rigg says that businesses should look at their top performers and assess the value they bring as well as their behaviours, and review what has been successful in the past. “It also comes back to looking at what types of clients they will be dealing with, and the experience they need.” 2) Ensure recruitment rigour: Don’t default back to the “coffee and a chat” when it comes to interviews. That’s the message from Randstad’s Rigg, who argues a rigorous recruitment process is crucial to getting the right candidate in the door. “It’s about getting a better understanding of their skills and abilities, and also what transferable skills they have from previous roles.” Rigg says this should ideally include “multiple methodologies”, including techniques such as psychometric assessment. “The aim of recruitment is to build a picture of who this person is, so you need to get as much data as you can get, including referees.” Businesses also need to articulate clearly what the role will be like. 3) Don’t stop there: The recruitment process doesn’t stop when someone has been hired and is sitting in the chair. It includes the crucial induction process.

“Make sure you have a well-structured first 90 days, so the candidate can learn all the skills they need to learn during that period,” Rigg says.

The other side

While finding the right candidates in the beginning is ideal, when you do make a mistake, knowing when to let someone go can be just as important to your business. 1) Follow a process: Letting someone go needs to be all about process, which means understanding performance and what is not working for the business. “KPIs can be valuable in gathering data about whether the person is doing, or not doing their job,” Rigg says. If an issue has been recognised then it can be possible to coach, manage and turn the candidate’s behaviour around. “We use performance enhancement plans. We say here’s your current performance, here’s where we would like it to be, and let’s work together to achieve that,” she says. In the end, it is about clear, open communication with the employee. “They have to know they are not performing.”. 2) Avoid the negatives: If a candidate needs to be let go, Rigg says that as long as it is performancebased, it could end up having positive benefits on the business. “If you do have someone not performing or who is a negative influence, you could actually find that benefits other employees.” However, Rigg says it needs to be handled with care. “If it is a shock, it could have negative effects.” 3) Consider flexibility: “Small businesses need to be agile and flexible, and staffing models need to be able to respond and react to that,” says Rigg. In a market that can be uncertain, Rigg argues that contractors could be used to create a flexible working team, enabling easy adaptation to seasonal workflows.

Letting someone go The Selector Group’s Ian Jordan is no stranger to letting staff go, although if it does happen again, the business may be more prepared for it. “It’s happened a few times in our journey, and there is no reason it couldn’t happen again,” he said. “In some ways, it’s quite easy to say the person is just not fitting in with the business ideals, and where we want it to go, but on the other side of the coin, they might be quite competent or a nice person, so from an emotional point of view it is difficult for all parties concerned,” he said. “However, in the longer term, both you and them are better off,” he said. Jordan says the experience has informed a more robust recruitment approach in future. “Each time, there is a bit of a lesson learned, so your questioning techniques are more refined,” he explained. “You actually end up hiring a little bit slower; there is no rush to bring someone on, because in the past when we’ve come across someone with a good skill set, we may have said bring them on, without considering the deeper issues,” he said.


Market talk

Our interest rate future The RBA’s recent rate cut has prompted a flurry of speculation of when and what their next move will be


nterest rates will continue to fall, but don’t expect massive cuts. That’s the message from AMP chief economist Shane Oliver. In the wake of the Reserve Bank’s Melbourne Cup Day rate cut, Westpac has predicted a further 75bps of cuts, while markets are pricing in up to 110bps over the next year. However, Oliver said it is unlikely the Reserve Bank will move aggressively on rates. “There’s nothing to suggest an aggressive easing cycle,” Oliver said. “Seventy-five to 100 sounds a bit extreme to me. To get those kinds of cuts the economy would have to fall apart, which I don’t think will occur.” Cuts this aggressive would only occur if the crisis in Europe severely deepened or commodity prices crashed. Instead, Oliver has predicted a milder easing of rates in the year ahead. “Certainly the risks are there, but I think a more likely scenario is we may get another 25, or at most 50. I think the market has probably priced in a bit too much,” he said. Nevertheless, rates are set to fall. With GDP growth revised downward, lacklustre job growth and easing inflation, the RBA’s November cut looked to inject the economy with some added confidence and provide support to demand. However, it is unlikely a single 25bp cut would achieve these goals, Oliver indicated. “Historically it has been very rare for the Reserve to do just one move in any direction. It usually comes with several follow-ups. It’s probably doubtful that one move on its own would provide stimulus to the economy,” he said.

RBA hawks still here? Shane Oliver

Robert Mellor

While deep cuts to the cash rate are unlikely, Oliver stated it is even more unlikely that the RBA will return to tightening rates any time soon. “The resumption of rate hikes and the shift onto higher levels is probably very unlikely. There’s more risk that the market’s right with its 110bps of cuts,” Oliver said. This is not a view shared by forecaster BIS Shrapnel. The company has predicted that the cash rate will continue to increase, leading to a peak 9% mortgage rate by mid-2014. BIS Shrapnel managing director Robert Mellor said he agreed that deep cuts to the cash rate are unlikely, but still contended the Reserve will return to its tightening bias within the next year. “We might need another quarter, but we’re not factoring that in. This was a pretty significant move by the Reserve Bank to partially acknowledge that last

year’s move may have been overdone. Our call is that they won’t move, and that the next rate move will be up around about the December quarter of next year,” Mellor said. At earliest, Mellor believes the RBA could ease rates in February before returning to a more restrictive stance. However, should the economy show signs of improvement over the Christmas season, such a move would be unlikely. “If Christmas retail trade is OK – not spectacular, but OK – we don’t think the Reserve Bank would lower rates,” he said. Mellor’s view on the future for rates stands in contrast to Oliver’s. Whereas Oliver conceded that the unlikely scenario of deep rate cuts was still more likely than rate hikes, Mellor said he believes exactly the opposite. “Any chance of a rate rise in the next six to nine months is highly unlikely, but a rise in the next 12 months is highly likely,” Mellor said.

Higher rates could be the tipping point

Oliver disagreed, and said a series of rate increases as predicted by BIS Shrapnel would likely push stressed homeowners over the edge and cause a “U.S.-type scenario”, Oliver stated. Last year’s rate hike proved that mortgage holders are more sensitive to interest rate movements than they were prior to the GFC, meaning slightly higher rates could have far more profound consequences. “That view ignores the fragility of the global recovery and underestimates the sensitivity of Australian households to higher interest rates. What the RBA was talking about as being mildly restrictive was probably quite tight. The mortgage rate in the historical context was quite low. It wasn’t as if it was anywhere near previous highs, but I think people’s attitudes have changed. Therefore, what was thought to be mildly restrictive was actually quite tight, and now the RBA is having to correct that,” Oliver said. But Mellor defended the idea of a 9% rate peak, saying economic fundamentals would underpin these rates. With BIS tipping the economy to return to growth, the ability of households to absorb rate rises would grow accordingly. Moreover, the company has still projected house price growth to remain somewhat sluggish. “The reason we’re fairly bullish on that is we think the economy will be fairly strong in those areas. People can withstand 8–8.5% if you only get modest price growth. It only gets to be too much if you get stronger price growth coupled with interest rates of 8.5%,” Mellor said. This view would require, however, that consumer wariness towards higher levels of indebtedness begins to abate. Prior to the GFC, Oliver said Australian households were comfortable with the idea of taking on more debt. This psychology meant that households were willing to accept higher interest rates. Oliver said consumers are unlikely to return to this attitude. “That psychology has now been killed off. It’s unrealistic to expect interest rates to return to previous cyclical highs,” he said.

NUMBER CRUNCHING Capital city house price index: Last five years Source: ABS 155 150 145 140 135 130 125 120 115 110 105 100





ACT Tas Total


Mortgage demand takes a dive At a glance…

-5.20% -6.60% -7.80%



-9.20% -10%


DEC 06 MAR 07 JUN 07 SEP 07 DEC07 MAR 08 JUN 08 SEP 08 DEC 08 MAR 09 JUN 09 SEP 09 DEC 09 MAR 10 JUN 10 SEP 10 DEC 10 MAR 11 JUN 11 SEP 11

-11.20% -12%





-10.50% -11.20%


34.6% The proportion of household income needed to service the average Australian home loan *

Source: PRDnationwide




The ‘cloud’ and its rainbows Have you ever wondered which webbased software programs could generate your next pot of gold? Tomorrow’s Mike Walsh has roadtested these nine just for you


y clients often ask me which web services I use and why. At first, I advocated the ‘cloud’ as a way of saving money and avoiding cruel and unnatural suffering at the hands of in-house IT. But after a while I realised that the most disruptive impact created by the cloud was not the death of traditional software, but rather a potential transformation in the way we work, collaborate and engage with clients. Here is my list of the top nine cloud services that have both changed the way I work, and more importantly, the way I think about it.

1) Google Apps – never delete anything

A few years ago I made the decision to move my entire email inbox, document storage and calendar scheduling activities to the cloud. Once I started using Google Enterprise Apps, I realised the absolute futility of deleting as a behaviour. A clean inbox is not a sign of personal efficiency, but wasted effort and poor filters. Storage is Google’s problem. Once I stopped worrying about keeping my inbox to a reasonable size, I started devoting energy to the more useful task of tagging conversations, setting up email filters, and using search tools to mine my own correspondence for commercial opportunities.

2) WordPress – Plug-in, not lock in

I was a big fan of Typepad for years, but eventually I ceded to the inevitable. The power of WordPress is its universe of third-party plug-ins – modular pieces of code that extend the functionality and aesthetics of your blog to that of a professional publishing platform. And for non-technical users like myself, that was a Godsend. Suddenly I could experiment with new features and design templates without spending money on development. Hiring someone to build you a website is a form of lock-in. You may have a wonderful platform for a few months, but you will lack the ability to understand the mechanics and make changes.

3) Mailchimp – Don’t wait, automate

Mailchimp provides incredible tracking tools, the ability to correlate social media information with your database, and advanced subscriber segmentation. But none of these features sold me on Mailchimp’s email distribution platform. My primary motivation was simple – laziness. When I write a blog post, Mailchimp’s RSS to Email service identifies the new content, formats it into a nice template and sends it out automatically. As any writer will tell you, one less barrier to getting things done, is one more step to getting things out.

4) Hubspot – Nurture your flock

In an age of decentralised discovery, the best marketing strategy is to create relevant content that allows your customers to find you when they are looking for insights and information. Hubspot was not a cheap decision, but it has been worth it. I host my corporate website on Hubspot, and it handles all of my primary interactions with visitors, subscribers and potential clients. Through embedded cookies, I get a sense of both what content my audience responds to as well as real time feedback into the social platforms that

generate the highest conversion rates. Hubspot is like a digital marketing agency in a box.

5) Shoeboxed – Scan and discard

Ironically for someone who published a book in physical form, I really hate paper. Receipts, business cards, letters, contracts – dead trees take up space, require organisation and, inevitably in my case, get lost. Shoeboxed was a revelation. Using their mobile app I simply take pictures of my receipts and business cards. They process and verify them, and upload the results to the Web. I regularly sync the records with my CRM tools and eliminate the time consuming exercise of scanning business cards and correcting errors myself. Bliss.

6) Highrise – Always be closing

It always annoys me that just like Wall Street and bankers, too many real estate agents still don’t realise that Glengarry Glen Ross is a dark satire, not a sales motivation movie. But you can’t argue with its most famous tagline – always be closing! For years, I flirted with the idea of – I liked its philosophy but hated its complexity and clunky interface. Highrise, created by 37 Signals, is a great alternative. Simple, efficient, and focused on tracking the people and conversations necessary to close deals. It doesn’t do everything, but what it does, it does well. It integrates with a variety of other cloud-based programs.

7) Freshbooks – Show me the money

Freshbooks is a very simple web-based invoicing program – but don’t be deceived. Its simplicity belies the fact that asking for and collecting money represents 99% of what it takes to be successful in business. Firstly, once you set up client profiles and billing templates, sending out an invoice is an activity that should take not more than 15 seconds. Secondly, clients will stop pretending not to have seen your invoice once you explain to them that Freshbooks informs you the minute they open it on their computer. And finally, when it is easy to see at a glance your received payments, uncollected invoices, and clients who pay late, it completely changes your perspective on how you should run your business.

8) Evernote – Pay attention to everything

Evernote is an application that I use all the time, but paradoxically, am still not entirely sure what it is for. Using my iPhone, I take pictures of newspaper articles, book spines, ticket stubs, retail displays – anything that catches my eye. I tag these with the topics I speak about, and every now and then dip into the cloud-based storage archive looking for something interesting to spice up a presentation, an article or a client meeting. For now Evernote is my ultimate visual diary – but I have a feeling it could also be a lot more in years to come.

9) Geckoboard – If you don’t watch a kettle, it will never boil

To paraphrase Lord Kelvin, what gets measured, gets done. My new favourite cloud service, and the final one on this list, it links all the other platforms together. I have Geckoboard running on a separate screen in my office – it gives me a live dashboard of all the key operations of my business. I can see at a glance my monthly revenue from Freshbooks, my web traffic and visitor activity from Google Analytics, a feed of the deals I have waiting to close from Highrise, the performance of my last email newsletter from Mailchimp, my current total Facebook and Twitter followers and a host of other essential metrics. Real delight awaits when you can watch the magical cogs of your business spinning in real time.

Once you set up client profiles, sending an invoice is an activity that should not take 15 seconds


People Ewens exits Bankwest for franchise role Former Bankwest national sales and operations manager of specialist sales, David Ewens, is now Mortgage Choice’s state manager for NSW and ACT, managing its operations there. Mortgage Choice general manager of product and distribution Andrew Russell said the broker had received “an impressive number of quality applications” for the state manager role, but had chosen Ewens in light of his experience with companies such as Bankwest, aggregator AFG, as well as St Andrews Insurance and Westpac. “It is fantastic that our business can attract high-calibre people such as David to help us drive the Mortgage Choice growth strategy,” Russell said. Taking over the role on 12 December, Ewens said he would work closely with the NSW and ACT franchisee network to “contribute to the company’s continued growth”. “I’m looking forward to better understanding and working through any challenges in consultation with the NSW/ACT franchisees so we can strengthen our support,” Ewens said. Ewens said he was drawn to the role after his previous experiences in third party distribution. “I have experience in third party from my work with AFG some years ago and was keen to broaden that experience within another large, robust and respected company, so it just ticked a lot of

David Ewens

boxes for me,” Ewens said. “It’s a great opportunity to get into a home state role. Mortgage Choice is a well-entrenched brand with a strong management structure, and from my dealings it seems to be a really well-engaged team.” Experience working for lenders may also prove a boon to his role. Ewens said his previous bankbased experience would aid in forging better partnerships between brokers and lenders. “I think we’ve all faced similar challenges on the aggregation side and the lender side. “To overcome future challenges we need to work in partnership and make sure all businesses benefit from open, honest and communicative relationships. My experience, connections and relationships formed over many years will assist me in supporting the Mortgage Choice franchise network in NSW and the company overall,” Ewens said.

MOVERS & SHAKERS Osborne finds home at MoneyQuest

Former Vow Financial head of sales and distribution, Michael Osborne Michael Osborne, has joined broking group MoneyQuest as the expanding group’s national BDM. In the newly-created role, Osborne has been charged with spearheading “aggressive broker recruitment” across Australia as well as strengthening bank and aggregator relationships. MoneyQuest general manager Gill McLean said the appointment was “good news” for the business, with Osborne lending weight to the group’s claim it is a new force in the industry. Osborne said the MoneyQuest business creates fairer commission structures, a unique approach to broker support and marketing, and an online marketing presence. Following Osborne’s appointment, the business appointed Andy Levstek as state manager for NSW to support recruitment of new brokers and increase existing sales.

Sintex snags two for service

Commercial funder Sintex has recruited a new BDM and a credit analyst, as Jaci Smith part of its drive to increase credit distribution through third party broking networks.

The group has appointed Jaci Smith as a BDM for NSW, as a result of her experience in business development in the third party finance and broking arena, as well as training and support within a national franchise environment. Sintex said Smith’s role will be to engage traditional mortgage brokers in regard to commercial deals, and provide them with the training and support they need. Meanwhile, Jehan Abay has joined Sintex as a credit analyst. Sintex said it would provide access to decision makers such as Abay to ensure longevity of business relationships.

Sheppard departs Mortgage Choice

Mortgage Choice’s head of corporate affairs Kristy Kristy Sheppard Sheppard has announced her departure from the brokerage business, after years heading the department following the departure of Warren O’Rourke for QBE LMI. Sheppard – a regular commentator in both trade and mainstream media – said she had: “Thoroughly enjoyed the past few years” with the business, and said she was moving on to MYOB to head up its public relations department for Australia/New Zealand. Belinda Williamson has been appointed as Sheppard’s replacement. Having been with the business many years, she is now acting head of corporate affairs.

10 days, one house? No sweat

The Browns and their new lodgings

Westpac execs get their hands dirty

They’ve done it again. After success last year at building a single house at lightning speed, employees from the financial sector – including mortgage insurer QBE LMI – dusted off their hard hats for another ‘Bidwill Blitz Build’ in support of Habitat for Humanity. The team raised the funds to exclusively sponsor and build a

family home for some struggling Aussie battlers – which they managed in just 10 days in October. The lucky family? Kathleen and Maurice Brown and their growing family of six, who have been freed from a brutal ‘rental round-about’ and living together in a single room at Kathleen’s mother’s place.


Caught on camera PLAN Australia took brokers to the Top End in October, where speakers including CEO Trevor Scott and innovator Mike Walsh expanded broker horizons amid networking, discussion and the sound of didgeridoos 1


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PLAN ‘Diamond Sales Masters’ acclaimed PLAN’s top broker Allen Lam with CEO Trevor Scott



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Buyer beware

“At least we don’t have termites”


recent survey happened to draw Insider’s attention. Property research firm PRDnationwide polled house hunters on their top turn-offs when looking at a potential home. The respondents to the survey wisely tipped termite damage, followed by foundation cracks, asbestos building materials and leaky swimming pools. The responses make sense, as any one of those problems could set homeowners back a fair bit in repair bills, and all four at the same time would make for a classic 1980s screwball comedy starring Tom Hanks and Shelley Long. Still, Insider was surprised at some of the common property flaws respondents overlooked. For instance, what about vengeful ghosts? Those are a lot more terrifying than termites and a helluva lot harder to find an exterminator for. How about a house that is currently on fire? Insider can’t even tell you how many times a slick real estate agent has tried to dupe him into putting an offer in on a house in the midst of a conflagration. Or, what about houses with one loose floorboard that flies up and whacks you in the face when you

step on it? Comedy gold, yes, but the dentist and cosmetic surgeon bills from the repeated blunt-force disfigurements really stack up. Insider can only hope that Aussie house hunters are going into the property market aware of all the dangers.

Renters? Get ‘em out!

Insider is no stranger to the needs of investor clients, who, it can be understood, are all about the hard mathematics of ‘yield’ and not much about those poor folks on the rental round-about providing them with it. In fact, Insider remembers one particular house party, where one investor (armed with his own home brew) backed him into a corner and began a vitriolic tirade against renters in all of their forms. In between explaining details of his strategy to buy property in the Blue Mountains west of Sydney (which, being 100 metres above sea level, would survive the impending melting of the ice caps brought on by global warming, leaving him with prime coastal real estate) as well as his penchant for debt (he was all about leveraging himself to the eyeballs and swimming in it, just like he will in that

much bigger ocean post-global meltdown), this investor painted renters as enemy number one. In fact, in contravention of what must be a few NSW statutes, this investor explained how he would happily evict pesky tenants from his properties, by waiting patiently until they went out, and then proceeding to move all of their worldly possessions on to the front lawn and changing the locks. What of the renters? The enemy! Why should he put up with rent being paid late, damage to the property, and any number of other side-effects brought on by those random mercenary-style souls with no loyalty to the premises? Which brings Insider (in a very long-winded fashion) to his point. He understands that one major bank, according to reports, was fighting in the courts in Victoria to allow it to evict renters from properties without notice when property owners default on their home loans. Branded “ruthless” by tenant groups, the move would see said banking institution able to turf out those renters (who don’t matter right?) so the bank could flip the house faster than ever. What, 28 days notice I hear you say? Are you kidding? One month is a long time when a fire sale needs to be made. And hey, with arrears on the way up, there may be more of these cases to come. Renters? Get ‘em out!

Money doesn’t grow on trees, it’s in the pool

Insider is always amazed by repeated announcements by the government and regulators such as ASIC over the growing size of the ‘unclaimed money pool’. Of course, everyone has heard the saying ‘Money doesn’t grow on trees’, but perhaps parents should be teaching their children a new addendum to this favoured saying: ‘..but it’s in the pool’. Recently, the ‘unclaimed money pool’ rose to $636m, over $28m more than in 2010, according to ASIC figures. Conveniently noting said funds down in discreet ‘parcels’

(which sound almost like they are wrapped up with a bow), ASIC said a total of 157,431 parcels have been added – just in 2011. In fact, there is so much money in this (rather large) pool, that ASIC is urging a kind of treasure hunt. ASIC’s Delia Rickard has said “there is more money in the unclaimed money pool than ever before, so even if you’ve already searched, you should look again”. Insider is all for treasure hunts, so if ASIC can provide a map with an X marking the nearest (preferably large) parcel, Insider would be more than happy to join the fun. As long as it doesn’t get him wet.

The saga continues ...

Insider knows you’ve all been waiting anxiously for an update on the ever-evolving saga of the Kiwi mortgage broker being investigated for fraud charges. He first brought you the story a few months back of the New Zealand broker who got clients to take out mortgages and give her the money, pleading with them that she needed it to pay off debts. Insider then updated you with the tale of the same broker starting a pyramid scheme to sell a discredited fuel additive in order to pay off her former clients. Now, our industrious broker has popped up in the news again, this time for defrauding a hotel. Evidently she gave fake credit card information for a hotel stay, and has now been charged with fraud over the incident. At her bail hearing, her solicitor asked the judge to remove bail conditions requiring her to regularly check in with the court as she awaits trial, claiming that the former clients to whom she owes hundreds of thousands of dollars have been harassing her any time she steps out her front door. Insider’s heart understandably bleeds for her. I mean, what kind of world do we live in when there are actual ramifications for stealing people’s life savings? Maybe they’d leave her alone if she gave them a few free cases of that fuel additive.

“Great day for a treasure hunt…”


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