Australian Broker magazine Issue 8.09

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ISSUE 8.09 May 2011

‘Common sense’ pledged as clawbacks expand

Peter Bromley

 Case-by-case

clawbacks to set fairer standard Some of the first smaller industry players to institute clawbacks have urged a “common sense” approach to new commission structures, by treating each loan clawback on its merits.

With a raft of new clawback measures being announced by non-banks and mortgage managers

ahead of a 1 July deadline for the abolition of DEFs, some groups are seeing a new opportunity to appeal to their distributors by taking a softer approach to clawbacks.

LJ Hooker recently introduced 100% upfront commission clawback for the first 12 months and 50% out to 24 months on its Classic Home Loan products, ahead of the 1 July deadline, in a move the real estate group’s finance arm says is “in line with industry”. This came in tandem with its DEF removal. However, LJ

Hooker Finance general manager Peter Bromley said the new structure included an exemption policy for incidents that were beyond the control of introducers.

“Lenders need to take a common sense approach to clawbacks,” Bromley said. “We’ve included an exemption policy, which will ensure that if customers have a genuine reason for exiting the loan, such as redundancy, divorce or death, the clawback won’t apply.”

Director of sales at Pepper Home Loans, Mario Rehayem, has also said that the non-bank lender’s clawback policy is a “fair” case-bycase proposition.

“Commission clawbacks for Pepper have been and always will be a manual process. We do have a clawback, but our clawback process is looking for a trend,” Rehayem said.

Less aggressive at 50% of upfront commission during the first 12 months, Rehayem said he personally reviews cases of early loan discharges, and will not institute a clawback unless a pattern of churn is clearly evident with a particular broker.

“The report comes back to me, and I look at the history of the broker with us and their deals. If the broker is a good broker and an advocate for Pepper, we won’t claw them back,” he said.

This approach treats brokers more fairly for circumstances which may be beyond their control, Rehayem said. “It’s a very common sense approach. At the end of the day, not every broker has a crystal Page 16 cont.

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Getting ‘greedy’ Could fee-for-service brokers tarnish industry image?

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Clawback paradox DEF ban and clawbacks conflict intermediaries Page 6

Online lifeline Brokers urged to embrace new way of business Page 14

Inside this issue Analysis Being careful with advice

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Viewpoint 22 The future of mortgage managers The Futurosophist 24 NCCP: The next 800 years Market talk 26 The housing density debate Insight Getting LinkedIn

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Toolkit Your PI checklist

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Caught on camera 32 Heavey out-putts St. George brokers

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News Brokers valuable enough to charge fees Brokers should not shy from fee for advice if they can demonstrate a value proposition above that of lenders, Intellitrain has claimed.

In a webinar on fee-for-service presented by the training group that attracted over 600 brokers, Intellitrain chief operating officer Andrew Hetherington said brokers who can demonstrate value to clients should not fear losing clients over fees.

“It is possible a client may not elect to use you, but that all comes down to your value proposition.

The key to this whole fee-for-advice thing is you have to demonstrate value,” Hetherington said.

Hetherington rubbished the argument that clients would elect to go directly to lenders if brokers began to charge fees.

“Do they get exactly the same thing when they walk into that lender’s [branch]? If they do, then absolutely you cannot justify that fee,” he commented.

Instead, Hetherington said, brokers should market their value proposition in providing a service offering above that of lenders. He commented that services such as loan structuring and even deal shopping provide a value to clients which he believes justifies a fee.

Hetherington suggested to webinar participants that they structure their fees on a tiered system to reflect different levels of service. He commented that presenting clients with a range of price options provides context for the value proposition of services brokers provide. In spite of supporting the idea of fee-forservice, Hetherington recommended that brokers provide at least one no-fee option among their tiered service offerings.

“What you’re doing is you’ve got an offer where if someone says, ‘Hey, I can go down the road and they’ll do it for no cost,’ you can still compete against that by saying ‘I can do that for you as well’,” he said.

Hetherington also addressed fears that widespread use of fee-for-service would cause lenders to further Andrew Hetherington cut commissions.

“Most of us aren’t charging a fee, they reduced commissions by 30% and they upped clawbacks periods, so my thoughts are they’re going to do what they want to do regardless,” he commented.

During the webinar, a survey of participants revealed that over 80% of the industry either charges or is considering charging a fee-for-service. Only 16% ruled out charging a fee.

Charge by the job, not the hour Intellitrain argues brokers should steer clear of charging for their services by the hour. COO Andrew Hetherington said “the strongest advice” he could give brokers was that charging a dollar value by the hour would be pursuing a business model that is “plain wrong”. Hetherington argued this was because customers are paying for outcomes, not the effort put in to the process. “Customers are just looking for certainty in obtaining finance, or structuring cash flows – so forget dollar per hour, it doesn’t work”. The possibility of charging a percentage of the loan size was also dismissed, as Hetherington said brokers would be going down a path of “potential bias”, where the larger the loan size for a client, the better it would be for a broker. Instead, the business advocates a dollar per job approach or a subscription/retainer model.

Fee-for-service could make brokers seem ‘greedy’ Charging a fee-for-service could be used against brokers to portray the third party channel as “greedy”, it has been claimed.

Outsource Financial CEO Tanya Sale commented that if brokers charge a fee for their services on top of receiving commissions, banks could use this to undermine the third party channel.

“There would be some lenders that have been waiting for something like this to transpire and are quietly rubbing their hands together with glee,” she claimed. “Think about what percentage of the banks’ lending

business goes through third party.

If the brokers charge a fee on top of their upfront and trail for a residential loan, they will be portrayed as ‘greedy’ and charging for something that the banks will provide for no cost.”

Sale said the debate over the feefor-service model is causing some brokers to consider the model out of fear that commission alone will not provide a suitable income. She believes many brokers who are experts in delivering mortgage services may not have the expertise in other areas to justify charging a fee.

According to Sale, brokers provide a loan writing service, justifying commissions from lenders, but not justifying a fee charged to clients.

“I believe our industry is getting confused with fee-for-service versus fee-for-advice,” she said.

Instead, Sale said, brokers should diversify their commission revenue through offering other products such as insurance, asset financing and leasing. She described this business model as having mortgage products as a “hub” and related financial products as “spokes”.

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Impact of DEF ban ‘negligible’: Advantedge

The impact of the DEF ban on brokers will be “negligible”, Advantedge has claimed.

Though many small lenders have announced commission clawbacks as a result of the ban, Advantedge general manager of lending distribution Brett Halliwell said he does not believe brokers will suffer increased clawbacks as a result of the ban.

“It’s important to remember that for most mortgage managers brokers are their only distribution channel,” he said. “I can tell you that no non-bank wants to claw back commission from a broker, so they will do everything possible to avoid this scenario. What this

means for non-bank lenders is that they will have to adapt their thinking, their products and their overall value proposition to the customer to ensure that the borrower remains with the lender without the impost of DEFs.” Halliwell commented that the broking industry will adapt to clawbacks from non-bank lenders in the same way it has adapted to commission changes instituted by major banks.

“Let’s not forget that clawbacks have been around for quite some time and it was the banks that introduced them first.

“The industry has now come to terms with clawbacks. Indeed, it did quite some years ago,” Halliwell remarked.

Halliwell said Advantedge had planned ahead for the ban on DEFs, and sees the opportunity for product innovation in the wake of the new regulation.

“The removal of DEFs will simply change the way that lenders structure their products and how brokers approach their clients. Some wholesale lenders have been thrown by the DEF ban, but Advantedge was planning for this a long time ago. We see considerable opportunity in the removal of DEFs – opportunity that will benefit the non-banks that are ready to adapt and have

Relief on the way?

Advantedge general manager of lending distribution Brett Halliwell has commented the business will soon be unveiling a new initiative for mortgage managers, and said Advantedge will work with mortgage managers and brokers on product innovation in light of the ban on DEFs. “While most people have been resistant to the change, we’ve been proactively building to accommodate it, rolling up our sleeves and working with mortgage managers and originators to identify opportunities and give them the tools to grow. What’s quickly become clear is that product innovation is required, and Advantedge is leading the charge in this regards,” he said.

Though Halliwell has not given details on the upcoming initiative for mortgage managers, he pledged it would be unveiled in the near future.

Non-banks not a last resort: Homeloans Non-banks are no longer perceived by brokers as a last resort for borrowers with poor credit, a survey has revealed.

A new poll conducted by Homeloans has found only 13% of brokers see non-banks as being most suitable for customers with poor credit. The result represents a 7% drop from the same research conducted six months ago.

Homeloans general manager of third party distribution Tony Carn said the survey shows brokers’ changing perceptions of non-banks. “Non-bank or alternative lenders are no longer

being perceived only as lenders of last resort or for those with poor credit histories,” Carn said.

“Brokers are now more open to recommending non-banks. Almost half (49%) of brokers said they wouldn’t find it difficult to recommend a home loan provider to a client who wasn’t familiar with that provider. That compares with 40% in August last year.”

With more brokers feeling comfortable with the non-bank sector, Carn has expressed optimism that non-banks may begin to see greater volumes from the channel.

the products to capitalise,” Halliwell said.

However, Halliwell has expressed doubt that the DEF ban in itself will make a significant difference in enticing borrowers.

“Bear in mind that most borrowers were unaware of them in the first place, so there’s little benefit in trying to explain how something they had never heard of has now been removed,” he said.

“Brokers are now even more willing to use a non-bank, but there’s still a lot of opportunity for them to put this into action – and I believe the abolition of exit fees will provide a good springboard.”

Carn predicted that the third party channel may become more comfortable with non-bank lenders after the abolition of DEFs. Though Homeloans recently tipped that it will institute clawbacks in some form as a result of the ban, Carn said DEFs had historically proven a bigger barrier between non-banks and brokers.

“Currently, for many brokers exit fees are a psychological barrier and they won’t refer loans with such fees.

Tony Carn Well, from July 1 this will no longer be a credible barrier,” he said.

Consumers are also becoming more open to non-bank lenders, Carn said. The Homeloans survey indicated 73% of non-first homebuyers are open to using alternative lenders, and 69% of first homebuyers would consider securing their home loan through a non-bank.

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Clawbacks and DEF ban Mortality a factor in aged lending declines a ‘paradox’: MFAA As more lenders begin to institute clawbacks under the DEF ban, brokers are being sent mixed messages about helping clients switch lenders,.

MFAA chief executive officer Phil Naylor has commented that clawbacks have typically served as an incentive for brokers to keep clients in a loan facility, while the government’s ban on DEFs is attempting to encourage brokers to help clients switch.

“We have on the one hand, a government-enforced incentive for consumers to switch lenders, and on the other, a lender-enforced disincentive for brokers to encourage, or even allow innocently, consumers to switch lenders,” he remarked.

Naylor called the extension of clawbacks under the government’s DEF ban a “paradox”.

“What message is being sent here for brokers? That ‘it’s OK to encourage another lender’s borrower to come to us, but you will be punished if one of our borrowers switches to another lender, whether or not you were involved’?”

As the DEF ban comes into force, Naylor said the MFAA will advocate for brokers if clawbacks begin to become a common occurrence.

“Whether this … becomes a real issue will be determined by the number of borrowers deciding to

walk. If there are many of them, the industry will have to deal with the repercussions for brokers sensitively and sensibly, and Phil Naylor the MFAA will be encouraging that,” he said.

Ultimately, Naylor believes the non-bank sector will try to tread softly on the issue of clawbacks.

With most non-banks relying wholly on brokers for their distribution, Naylor said nonbanks will work to prevent alienating the channel.

“They will have to make whatever decisions necessary to enable them to remain in the market, but I suspect they’ll be making those decisions cognisant of the fact that in the main they are relying on brokers to distribute their products,” Naylor remarked.

As for brokers, Naylor said providing consistent client service will be the only way to guard against clawbacks.

“All they can do is to ensure that they get the most appropriate deal for their clients and continue to stay in contact with them to ensure the broker is best placed to provide continuing assistance and credit advice to ensure the clients’ interests are totally looked after by the broker,” he said.

Bank lending to older borrowers is subject to longevity risk calculations by financial institutions, and is a “very complex issue” broader than declines based on serviceability, a broker has claimed.

Following ASIC’s recent guidance to lenders which questioned assumptions that are seeing credit denied to worthy older borrowers, Bernie Kelly of aggregator Trigon Financial said the matrix of calculations made by banks included the age and longevity risk of a borrower.

“Brokers from time to time experience strange decisions regarding various declines,” Kelly said. “One would view decisions regarding age being subject to longevity risk. Various mortality simulation models exist to quantify risk, and most if not all lenders apply this longevity risk model to loans relating to older borrowers, as lenders are not particularly interested in providing credit where ultimately they would end up the owner of a physical asset,” he said.

Explaining the issue, Kelly said if banks lend to an older borrower of 55 or 60, who has the capacity to make repayments as well as the capital assets required, it may not even “matter what the assets are worth.”

ASTLA opens up broker member option The newly-launched Australian Short Term Lenders Association (ASTLA) has opened up a new associate membership option for finance brokers.

ASTLA media and government liaison Paul Stone said although the association had been set up for short-term business lenders, the initiative had “received enormous

support from finance brokers”. The association was launched to lobby the government over aspects of Phase 1 of the Credit Reform Act, which has come into effect, as well as Phase 2, which relates to short-term and business lending.

“Brokers who write a lot of business loans and commercial loans, as well as short-term business loans

(caveat loans) have a lot to lose if certain aspects of Phase 2 were to be implemented,” Stone said. The association argues that the ability for small business to find finance could be “seriously impaired” by the legislation. ASTLA said the legislative process has made obtaining short-term funding for the purposes of buying or

Bernie Kelly

“If they lend money to an older person and apply that mortality risk, the customer may well be strong financially, but the question is raised that if that customer passes on, will the property go to the estate, or will the lender be forced to try and sell the asset?

“There are broader issues that are taking place internally within credit providers, and the understanding of mortality and mortality risk is something that is not at the coal face,” he said.

Kelly said most other developed markets such as the UK and US had an insurance industry that provides long-term or ‘whole of life’ insurance which could assist these borrowers. renovating a residential investment property, or paying arrears on such a property “almost impossible”.

Another “ludicrous” situation, according to ASTLA, is where a developer may need $200,000 for two months to pay for a shortfall in completing a 20-lot subdivision, but because it is residential, and owned in the name of a natural person, the finance now falls under the NCCP. “Most business lenders won’t look at the loan,” Stone said.

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Lenders ‘cherry-picking’ SME market MFAA members has suggested SMEs face a difficult credit environment amid fewer lenders and tightened credit criteria.

Naylor said some commercial brokers have been forced to take deals to private ANZ tops business satisfaction lenders with ANZ has overtaken Westpac in satisfaction rankings interest rates among business customers, according to Roy Morgan ranging from research. Here’s a look at the breakdown: 10–20%.

“Our 63% finance 62% brokers are reporting that 61% many of the 60% January smaller banks February and the 59% March non-bank 58% lenders have left the SME 57% market, 56% especially ANZ Westpac CBA NAB when it comes to property Source: Roy Morgan Research developing The MFAA has claimed SMEs face tighter lending conditions, and has accused lenders of ‘cherry-picking’ the market.

MFAA CEO Phil Naylor has commented that feedback from

and office equipment and fit-outs.

That then leaves the large retail banks with most of the market,” Naylor remarked.

The MFAA has accused lenders of “cherry-picking” the market, saying property developers are being asked for larger equity commitments of at least 50% pre-qualified sales. Naylor said one large lender was asking developers to refinance so it could exit the sector.

Naylor said fully secured lending to businesses is rapidly overtaking cash flow lending, where the decision on whether or not to approve a loan is made on the quality of the business and receivables. According to Naylor, this means many business owners will be forced to put up their family homes as collateral.

“The GFC created a liquidity issue in our banks, and in response most of them have re-absorbed their business finance

arms into the main operations of the bank,” Naylor said.

“It means experienced business lenders who negotiated deals with brokers on their business merits are now subject to more conservative practices.”

Naylor pointed to recent RBA data which shows business lending declined 1.7% in the year to February 2011, while housing credit rose 7%. The RBA data also indicated the four major banks controlled 86% of the SME debt lending market as of September 2010, but wrote only 74% of all business loans.

“There’s nothing wrong with banks being careful with their lending criteria. However, SME finance is an important part of the Australian economy and the MFAA wants to see more competition in the area.

Businesses need funding options which means the market needs competition,” he said.

ANZ sets out to woo business customers ANZ has overtaken Westpac with the highest satisfaction rankings among business customers.

The latest Roy Morgan Research Business Bank Monitor shows ANZ rose to 62.1% in the satisfaction rankings for March, up from 58.6% in February.

Westpac ranked second in the ratings with 61.2% customer satisfaction, up slightly from 60.5%. CBA and NAB remained largely unchanged. Though ANZ now leads the Big Four in business customer satisfaction, it remains significantly behind St.George (65.3%) and Suncorp (68.2%).

While business customers typically rate banks more harshly than personal banking customers, the Roy Morgan Business Bank Monitor is generally an indicator of how banks will be rated by personal

banking consumers. The most recent Roy Morgan consumer banking survey indicated CBA had fallen to the bottom of satisfaction rankings. Westpac and ANZ also saw declines, while NAB, which took over third spot from CBA, remained unchanged.

ANZ general manager of small business banking Nick Reade said the bank managed to top business customer satisfaction rankings among its major bank rivals because of its focus on hiring small business specialists.

“Increasingly we hear small business owners tell us they want to deal with a specialist in small business, so we’ve recently employed an additional 130 small business specialists. Many of them have worked for, or been involved in small businesses so they

understand the issues they face,” Reade said.

Roy Morgan Research finance industry director Suela Qemal said while banks are closing the gap between business and personal customer satisfaction levels, the results indicate there is still work to be done in marketing effectively to both client bases.

“With customer satisfaction being one of the key measures affecting the broad customer engagement and loyalty issues, financial institutions have been focusing on increasing satisfaction levels for both personal and business customers, and closing the gap in

satisfaction levels between its business and personal customers.”

“Despite this, the gap is still in double digits in favour of the personal customers. Banks have the task of adopting a more customer-centric approach on understanding their customer in both markets, particularly in small business, where the distinction of personal vs business is blurred.”

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Push for scale driving consolidation wave Widespread consolidation in the aggregation and mortgage market has seen broker group numbers shrink by 27% over the past year, according to new research.

Data from the Market Intelligence Strategy Centre (MISC) shows that the number of broker groups (which includes aggregators) in its research pool dropped from around 190 a year ago, to only 138 in the December quarter 2010, representing a 27% decrease.

MISC attributes the large decline to a spate of mergers in 2010, driven by economies of scale. These included Firstfolio’s acquisition of Club Financial Services, Key Invest’s acquisition

of First Rock, Astute’s joint venture with Mortgage Wisdom, Vow Financial completing its combination of three aggregation groups, and Mortgage Choice’s acquisition of LoanKit. MISC said the six most important mergers of the period involved more than $30bn in loans under management, and all occurred in the 12 months to the December quarter 2010. The previous year only saw three significant consolidations, according to MISC’s research.

The top five broking groups in the MISC research pool accounted for 56.4% of all broker-sourced loans during the period, a level which MISC

Planning commission ban a threat As commissions for financial planners are banned, FBAA president Peter White has said mortgage brokers must consider the possibility that a similar fate could befall the mortgage industry.

The government recently unveiled reforms under which commissions for financial planners will be banned. White has stated that brokers should not discount the possibility of similar moves in the broking space. “The best model is that the client doesn’t have to pay anything, but we’ve seen what happened in financial planning, and it is something we can’t bury our head in the sand over. If we don’t plan for tomorrow, we won’t be here tomorrow,” White commented.

White remarked that the commission ban applied to financial planners is the latest in several moves that have seen financial service providers stripped of commissions. He said brokers must proactively plan for the future in the event that the industry is the

next to face such regulation.

White commented that brokers should not shy away from discussions over fee-for-service. He said while he has never been prescriptive as to how such fees should be structured, he has been vocal in his support of the model.

White rubbished claims that discussions about the model could be responsible for banks cutting commissions. “There’s a mindset that by talking about commission cuts you’re encouraging the banks to do it. The banks are already heading down that path. This isn’t something that started six months ago or a week ago. That erosion started years ago,” White said.

White does not believe brokers have fallen prey to any conflict of interest as a result of commissions, but predicted lawmakers could view the situation differently. “The best result is that the banks keep paying commission, but if the government decides it’s a conflict of interests I think banks would be happy.”

labelled a “high level of concentration”. However, the research group said the dominance of these groups was coming under competitive pressure, as the top five broker groups found themselves down on the 60% of broker loans they wrote a year earlier.

The next tier of brokers (groups 6 to 20) was responsible for the competitive pressure, having increased its share of the market from 34% to 36% over 12 months.

These groups also wrote loans 7% larger than the $257,975 average loan of the market’s top five groups.

MISC said the concentration among top broking groups has

been driven by National Credit Code requirements. “These have meant that many smaller, more occasionally operating brokers, trading beyond large aggregator groups, have succumbed to the greater administrative burdens of the code.”

However, MISC said the Credit Code had affected broker numbers, rather than broker group presence in the market, and added the mergers had an impact on competition in the market.

“The impact of mergers in the past year, while failing to explain the loss of share of the big five broker groups, has clearly impacted on the top 20 share growth,” MISC said.

Aggregators come under fire from brokers

Intermediaries have not held back in their contributions to the fourth annual MPA Brokers on Aggregators Survey.

From non-existent training provisions to lengthy delays before calls are returned, respondents to the poll had a number of gripes with the service they are receiving from their aggregator partners.

Brokers were asked to rank the importance of a number of elements of their aggregator’s proposition, with the quality of their lending panel topping the importance list.

Marketing support was deemed least significant.

Advisers were then asked a range of specific questions about their relationship with their aggregator including their thoughts

on mergers, white-labelled products and commission payments.

There was some comfort for aggregators in the fact that 88% of those surveyed said they were not looking to leave, but many of the comments left by brokers belied the headline statistic.

One disgruntled broker from Samford said: “I can’t change aggregators due to unfair benchmarks on my agreement that if I don’t meet in any one year, the aggregator has the right to keep my trail if I leave. Pity any broker who has six months off through holiday or sickness.”

It wasn’t all bad news for aggregators however, with respondents heralding their aggregators for their compliance support, quality of BDMs and IT systems.

To see all the statistics and read the full report, pick up a copy of issue 11.5 of MPA which is out now, or read the report online www.brokernews.com.au

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Interest rates no barrier to buyers Interest rates are not a major deterrent to people entering the housing market, it has been claimed.

Dean Rushton A new survey

by Loan Market has indicated consumers tip housing affordability as the biggest barrier to market entry. The poll asked respondents, “What do you consider the main market issue facing first homebuyers?” Results showed 65% of respondents considered housing affordability a major obstacle, while only 12% cited interest rates as a concern.

Those in the 25–40 age group showed an even stronger response to affordability issues, with 70% tipping it as the biggest obstacle to home ownership.

Loan Market COO Dean Rushton said the result is indicative of the RBA’s recent sidelines approach to interest rates.

“The survey result shows that the RBA leaving the official

cash rate alone for the past five months seems to have neutralised interest rates as a deterrent,” Rusthon remarked.

Rushton has predicted that as rates remain untouched and the economy continues to show signs of strength, first homebuyers may re-enter the market after a period of recent inactivity.

“With rates on hold and unemployment continuing to fall, first homebuyers are surveying their options in the market,” he said.

However, with affordability still proving a barrier to firsttime buyers entering the market, Rushton has urged the government to act to provide assistance to prospective first homebuyers.

“The upcoming federal budget provides the government with an opportunity to offer real assistance to first homebuyers. Most observers would concede that the First Home Savers scheme has failed to have any meaningful impact,” Rushton commented.

What is the biggest barrier to entering the housing market?

Lack of competition between lenders

13%

Interest rates

12%

Housing affordability

65%

The possibility of a housing bubble

10%

Source: Loan Market

Construction falters as REIA predicts housing recovery The value of new residential building has fallen in the December quarter, the Australian Bureau of Statistics has revealed.

According to ABS numbers released in April, the seasonally adjusted estimate of the value of new residential building work done has fallen 0.7% in the December quarter. Work done on new homes fell 1.4%, while work done on other residential buildings rose 0.7%.

The results follow a September quarter in which residential building work fell by 6.3% in September 2010, with a 9% drop in detached house activity.

Work done on major alterations and additions was largely unchanged in the December quarter.

Most states and territories recorded a drop in building work done, with declines of 2.3% in New South Wales, 4.8% in Queensland, 5.8% in Tasmania, 0.4% in the Northern Territory, and 10.4% in the ACT. However, Victoria, WA and South Australia all saw rises, with new residential work done increasing by 3.2% in Victoria, 1.1% in South Australia, and 2.6% in Western Australia.

Housing Industry Association chief economist Harley Dale has pointed to the result as justification of government intervention in the housing market.

“In 2011 we look set to experience one of the weakest years for new home starts since the mid-1990s. The federal

government needs to act urgently to introduce short-term stimulus measures to boost new housing activity and turn around a housing slump that is shutting out first homebuyers and aggravating financial stress felt by lower income rental households,” he said.

Meanwhile, the REIA has claimed recent drops in median prices are temporary, and will not result in a significant downturn.

“It is important to understand that house prices, while increasing over time, have periods when price growth either subsides or decreases; however, over time the fundamentals are there for continued growth. The drivers for this growth will come from lack of supply, population growth and changes in the household formation rate,” REIA president David Airey said.

According to the REIA, any slowdown or decline in house price growth can be attributed to a number of factors, including the RBA’s tightening policies, low affordability, consumer caution and the exit of first homebuyers from the market.

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INDUSTRY NEWS IN BRIEF CBA hits bottom of satisfaction pile Commonwealth Bank has fallen to the bottom rung of customer satisfaction rankings. The March Roy Morgan Bank Customer Satisfaction Report shows CBA slipped 0.8% in March, to settle at the bottom of the Big Four. NAB remained unchanged, but has managed to move from the bottom of the pack to sit at number three. ANZ and Westpac both saw declines, with ANZ slipping 0.7% and Westpac falling 0.1%. ANZ remains top ranked at 74.4% satisfaction, trailed by Westpac at 73.8%. The decline marks the first time since March 2008 CBA has come in last among the Big Four in satisfaction rankings. Roy Morgan industry communications director Norman Morris put the result down to continued backlash over Commonwealth Bank’s decision to move first on rate hikes in November last year.

NAB extends Homeside promotion NAB Broker has announced it will extend its offer to waive application fees for non-NAB borrowers who refinance with Homeside. The offer to waive the $600 application fee has now been extended to the end of June 2011. Brokers can also access the current offer of a $700 switching incentive for non-NAB customers who refinance through NAB Loan Writing Solutions to the end of June. NAB Broker’s John Flavell said Homeside’s rates and ramped trail commission structure should prove enticing to brokers. “Homeside’s marketleading rate of 6.9% for loans of $250,000 and above and an LVR up to 75% continues to deliver fair value to brokers and their clients. The commission structure, which includes an upfront commission of up to 65bps and a ramped trail up to 35bps, also provides brokers with competitive remuneration and helps them to build their business value over time.”

SME confidence on the rise Business confidence has seen a significant boost in the March quarter while business conditions deteriorated, NAB has indicated. The bank’s quarterly SME business survey has found business confidence has risen to its highest levels since the first quarter of 2009.

Business conditions, however, fell to their lowest levels since the second quarter of 2009.

Small and medium business owners reported that borrowing costs, economic uncertainty, cash flow issues and staffing concerns were less significant constraints in the March quarter. Amid this confidence, trading, profitability and employment conditions all declined. NAB’s Daryl Johnson said the result shows while SMEs are optimistic, many still face an uphill battle. “Despite this optimism, SME business conditions have remained on a gradual decline from the post-GFC peak in December 2009, pushed down again by the recent floods that are estimated to have reduced national business revenues by 5% in January,” he said.

Inflation figures no cause for alarm: REIA Rising ABS inflation figures should not necessitate a rate rise, the REIA has claimed.

The ABS indicated in April the CPI rose 1.6% in the March quarter, compared to 0.4% in the December 2010 quarter. The result represents the largest quarterly rise since June 2006, and puts the CPI for the year to March at 3.3% compared to 2.7% for the year to December 2010. However, REIA president David Airey has dismissed any need for a rate rise, saying the inflationary measures preferred by the RBA show inflation within the central bank’s comfort zone. “The Reserve Bank of Australia consumer prices measures of weighted median and trimmed median are 2.2% and 2.3% respectively for the year – well within their target zone of 2–3%. Despite the March quarter CPI being the highest since the June quarter 2006, inflation is under control,” Airey said.

Buyers and sellers in ‘Mexican standoff’ The Australian property market slowdown is resulting in a Mexican standoff between buyers and sellers. Cameron Kusher, senior research analyst at RP Data, said caution from buyers combined with a reluctance to sell in a softening market is slowing activity, particularly in Sydney. “We’ve got to a point with interest rates where people are hesitant over spending $200, let alone property,” said Kusher. “Meanwhile, sellers have realised that it’s not the best time to bring properties to market: we’ve seen the number of new listings falling in Sydney over the last four to five weeks.” Kusher added that activity from first homebuyers and investors remains very low, with the bulk of transactions coming from upgraders. However, he warned that many upgraders were stuck: while they may have located a suitable property to upgrade to, they are experiencing difficulty in selling their existing property.

Your Mortgage gets web makeover The most trusted and established mortgage comparison website in Australia has a new look.

Since 1995, Australian Broker’s sister website Yourmortgage.com.au has been providing daily updated interest rate information to Australian home and investment borrowers to assist them in finding the loan that suits their needs. Drawing 150,000 visits per month, Yourmortgage.com.au is a one-stop resource where clients can find the latest property news, price comparisons and loan calculators. Visitors to the new-look website will notice some exciting new features including Your Mortgage TV, where you and your clients will have access to exclusive video interviews with industry leaders, and the Your Mortgage forum, where you can look for advice from fellow property buyers or industry insiders and join the latest discussion. Clients can visit the site at www.yourmortgage.com.au

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‘Brokers must embrace online to survive’ Brokers may continue to see volumes dwindle unless they adapt to a changing digital marketplace, an industry analyst has claimed.

Fujitsu executive director Martin North has said broker usage has stabilised at 41% market share, and predicted that market power has slipped from brokers unless the industry can change its service proposition. According to North, in a market increasingly made up of “digital natives” – consumers who have been raised in the internet era – brokers need to find new value propositions other than offering the best price.

North, commenting on the JPMorgan/Fujitsu Australian Mortgage Industry Report, said the broker proposition had historically been perceived to focus

on delivering a price advantage.

This, North said, would not be enough to engage “digital natives”.

“If the broker proposition is just about finding the cheapest home loan, that’s easily substituted by the online proposition,” he commented.

Instead, North suggested brokers utilise technology in their service offering and promote services apart from price comparison. He commented that brokers have recently been more reliant on refinancing, typically the domain of older borrowers.

North said he does not believe brokers can count on this refinancing trend in the future.

“Over the next six to 12 months, I believe we’re going to see refinancing come off,” North said.

However, North believes significant opportunities exist for brokers and lenders to tap into the “digital native” market. He commented that borrowers who prefer face-to-face interaction are “over-serviced” by the industry, whereas consumers who prefer online interaction are “underserviced”. Addressing this oversight, North suggested, could be key to the continued health of the industry.

“If the broker market doesn’t change, I think we’ll continue to see a downward tilt in volumes,” he said.

North expressed optimism at the ability of the channel to embrace this change. He commented that smaller players were especially well-positioned, as they could adapt to change more quickly.

Lenders pushing products instead of focusing on customers: North The mortgage industry needs to focus on customers instead of products to remain profitable, it has been claimed.

Industry analyst Martin North, executive director of Fujitsu Australia, has told a Sydney media gathering that lenders focus too much on product development while ignoring the differences between customers.

Commenting on the findings of the JPMorgan/Fujitsu Australian Mortgage Industry Report, North said he expects “customer pull” strategies to become more important than “product push” strategies.

“Most financial service providers are product driven.

Products are where the strategy is being driven,” he commented.

“Segmentation is the way to enhance revenue. I believe the next 12 months will see some interesting innovations in segmentation.”

North explained that segmentation identifies various demographics of potential customers and tailors service offerings to their specific needs.

He identified several different types of borrower, including the “Battling Urban”, “Disadvantaged Fringe”, “Suburban Mainstream” and “Young Growing Families”, and said each of these demographics value different service propositions.

“It’s not a ‘one-size-fits-all’ approach. This entails tailoring

and targeting propositions to specific customer groups based on their needs, preferences and value,” North Martin North commented.

According to North, “Suburban Mainstream” households are more influenced by good service and rewards than by pure price, and the mortgage industry should target its offering to reflect this.

“Segmentation says not all customers are the same. It’s been a price-driven market, whereas customer-centric thinking is now very much the ‘in vogue’ thing. It requires a better understanding of customers to identify ways to avoid over-servicing unprofitable areas of the customer base in order to improve satisfaction and in turn capture market share.

This requires new approaches to banks and business and technology processes and systems to enable greater agility and enhanced flexibility,” North said.

The JPMorgan/Fujitsu Report also found that “Suburban Mainstream” households are the most likely market segment to use a mortgage broker. The report recommended that lenders wanting to tap into this market segment collaborate with broker channels to develop products and service offerings.

Robust credit growth a thing of the past Banks cannot expect a return to the days of double-digit credit growth, a new report has claimed.

The JPMorgan/Fujitsu Australia Mortgage Industry Report has indicated credit growth has slowed from 9% in September 2010 to 6.7% by February 2011.

According to JPMorgan banking analyst Scott Manning, this slow level of growth is set to be the norm for some time.

“We predict growth will be lower for longer,” Manning said.

Fujitsu executive director industry group Martin North commented that households are feeling the pain from interest rate hikes and cost of living increases,

and demand for credit will continue to be sluggish as a result.

“We think a lot of households are on a bit of a knife’s edge at the moment. Disposable income is significantly below what it has been for the past five years,” North said.

Manning said this lower demand for credit means banks will have to adjust the way they manage their profitability.

“We expect that restraint in consumer spending and borrowing behaviour will remain for some time. This necessitates a better understanding of the customer base in order to improve profitability at lower levels of growth,” he remarked.

Managing profitability means banks will have to rely on optimising the margins of their current loan books, Manning said.

“In the current environment, where housing credit growth is likely to remain lower for longer, banks are actively managing profit margins through the liability side of their balance sheets. Banks that were growing strongly during the global financial crisis have dramatically slowed their domestic mortgage growth rates and are focusing on the profitability of the existing mortgage book,” he commented.

According to the JPMorgan/ Fujitsu report, CBA and Westpac

have seen substantial slowing in credit growth, with their mortgage growth falling from 25% to 5% over the last 18 months. ANZ and NAB, however, have seen mortgage growth rebound, with NAB growing its mortgage market share 1% since January 2010.

Overall, Manning said, banks will no longer be able to count on the robust credit growth of the past.

“The major banks and investors alike will have to get used to a future where the domestic mortgage market will not constantly deliver the double-digit rates of credit growth enjoyed over the previous two decades,” he said.

16 www.brokernews.com.au

News ball and a sense of where a deal is going to go.”

LJ Hooker’s policy means clawbacks will not be applied should clients switch products internally – such as from a variable rate to a fixed rate – or if the customer buys and sells property within the franchise’s network.

Bromley said the policy is a balance where LJ Hooker is “not encouraging churn”, while “making sure that there is a common sense approach to why that loan paid out”.

He has also argued that changes made earlier to improve its loan processing for the Classic Home Loan range would offset any impact from the new clawback measures.

“We made strategic changes to our home loans, including providing direct access to the credit assessment team, to give our brokers the confidence to write loans that suit a customer’s circumstances,” Bromley said. This

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included giving brokers access to a dedicated credit manager for each file, which remains with that individual throughout the process.

“With more control, brokers should not fear clawbacks from DEFs,” he added.

Bromley said the business had “thought long and hard” about how to turn the ban on exit fees and DEFs into an advantage for the smaller LJ Hooker Finance operation. “The ban can potentially affect smaller lenders, the big banks have massive share, but we had to say to ourselves how can we, with that ban, turn that into an advantage for us?”

The answer was to ban DEFs ahead of time, Bromley explained.

“Customers 12 months ago were interested in if there was an upfront fee, or if there was an application fee, or what the interest rate was. A lot of customers today are asking if there are exit fees. So I think –

rightly or wrongly – the media has done a good job of educating our customers.”

LJ Hooker Finance hopes to gain more business by moving earlier than its competition.

“Customer feedback tells me they don’t want it [a DEF], therefore we have to make sure that from a marketing perspective we are right on top of that opportunity,” he said.

The removal of DEFs could even be a driver for renewed competition in the sector, Bromley argues, and commissions shouldn’t be affected if brokers are supported.

“The removal of DEFs for the non-bank sector is another driver for competition,” he said. “It will allow us to take the lead in service, advice and responsible lending.”

Peter Bromley

Specialised lending becoming mainstream option The nature of specialised lending is set to become more mainstream as banks tighten lending criteria, Pepper Homeloans Mario Rehayem director of sales Mario Rehayem has said.

Rehayem said with the appointment of five new BDMs, the lender is looking to significantly increase volumes and reach out to the third-party channel.

Rehayem commented that specialised lending is no longer merely an option for self-employed

borrowers or customers with poor credit histories.

“The difficult task we’re going to have is re-educating the market on what specialised lending is all about. If you look at conversions, where mortgage insurers have restructured applications and major banks have tweaked credit scoring, a lot of this business that was prime business just 24 months ago is now being declined,” Rehayem said.

As the majors decline these deals, Rehayem said specialised lenders are in a position to see greater volumes.

“At the end of the day we don’t want to have the goalposts too far from the majors if we don’t have to, but we can sit right behind them as the appetite from brokers and customers is there.

“The business is there to be written tenfold. All we need to do now is make sure that we’re as innovative as possible with our product suite,” he said.

Rehayem has urged brokers to consider specialised lenders when working with borrowers. When a deal is knocked back by a lender, Rehayem said, brokers should not give up on an application.

“We have a bit of a motto that customers go to brokers for options. If they wanted to go to CBA and get a CBA loan, they would do that,” he remarked.

“What we’re saying to the broker is just because a major or mortgage insurer has knocked a deal on the head doesn’t mean there are no options for the customer. Brokers need to exercise the right the customer has to choice. Don’t just ring them up and tell them a deal has been declined. Brokers need to start focusing on every available option.”

Poverty line no barrier for Aussie banks Australian banks are too lax in their lending standards, a new study has claimed.

A new Bank of America-Merrill Lynch report has suggested that Australian banks are too liberal in assessing borrowers’ monthly cost of living expenses, and are willing to lend too large an amount to households.

The Bank of America-Merrill Lynch assessment found that Australian banks estimate the amount borrowers need for cost of living expenses at up to 7% below internationally recognised poverty indicators, and will therefore lend to borrowers below the poverty line. The Henderson Poverty Index projects the minimum necessary monthly expenditure of an Australian couple at $1,814 a month, while

Australian banks project the amount at $1,708. Bank of America-Merrill Lynch, however, puts the number at $2,018 for a “barebones” budget and $2,504 for a “normal” budget.

Of the major Australian banks, the report found that Commonwealth Bank was most conservative in its lending criteria, followed by Westpac and NAB. ANZ was found to be the most aggressive lender of the Big Four.

Merrill Lynch analyst Matthew Davison said banks are being too aggressive in growing their market share, while overestimating borrowers’ ability to service a loan. “We think banks lend too aggressively against living costs,” he commented.

Davison said rising costs for household necessities such

as food, transport and healthcare have not been taken into account by banks in the loan approval process.

“We believe the strain on the household budget is too big to ignore, and banks don’t accurately measure household costs,” Davison commented.

Davison predicted that these pressures, once taken into account, could lead to a more stringent credit analysis.

“These pressures could possibly prompt the banks to update household budget models, thus tightening mortgage lending standards,” he said.

Davison has also suggested that banks do not properly investigate borrowers’ credit cards or saving history.

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Vacancy rates fall as rents outpace property value growth

The national vacancy rate remained well under 2% in March – indicating that tight rental market conditions continue.

SQM Research’s latest figures place the overall vacancy rate at just 1.6%, the same rate as in March 2010, despite a softening housing market. The firm puts the ongoing low vacancy rates down to hesitancy from buyers to leave the rental market due to high interest rates. This, in turn, is aiding in a greater demand for rental dwellings.

“As the housing market enters further into its downturn, more and more would-be buyers are waiting on the sidelines, hoping for more price falls,” SQM Research managing director Louis Christopher said. “Indeed, there are now less first homebuyers in the market than what we had 10 years ago. Of course, these buyers still need somewhere to live, and so the demand for rental accommodation has accelerated in the past 18 months.”

The city with the lowest vacancy rate in March was Canberra, at just 0.6%, followed by Perth at 0.9%, then Sydney and Adelaide at 1.2%. Melbourne and Darwin had the highest vacancy rates at 2.4% and 2% respectively. The only capital city to record an increase in vacancies was Hobart, which grew by 0.3%.

The results come as new data indicates rental growth is outperforming property value growth in capital cities.

According to research from RP Data, the combined average of capital city house values has grown 6.2% over the five years to February 2011, while unit values have grown 6.7%. However, rental rates during this time period increased by 6.8% for houses and 7.5% for units.

RP Data research analyst Cameron Kusher said he expects rental values to continue to trend upward while property values may remain relatively flat.

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“With investors and first homebuyers reluctant to spend at the moment, coupled with housing affordability stretched because of recent value growth and a weaker period of interest rates and construction for the remainder of 2011, we anticipate this will put upwards pressure on rents.”

Kusher said rents are expected to move in 2011 despite having been stagnant for some time.

“Rental growth has been sluggish for quite some time. We expect there to be improvements [in] increases [to] rents,” he said.

Rental growth Feb 06 – Feb 11 Houses

Units

Sydney

6.90%

7.40%

Melbourne

7.50%

7.60%

Brisbane

5.40%

6.30%

Adelaide

4.80%

9.70%

Perth

8.70%

8.40%

Darwin

10.00%

10.00%

Canberra

6.50%

5.80%

Combined

6.80%

7.50%

Source: RP Data

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Vow’s wealth business to ‘quarantine’ clients Aggregator Vow Financial has launched a joint venture wealth management business with Sydney-based financial planning firm The Selector Group, as a first step towards a fully-fledged financial planning arm.

Branded Vow Wealth Management, Vow Financial said the additional services on offer would give its broker network diversification opportunities through developing new income streams in financial services.

The new business, to be managed

by Vow national sales manager Justin Dale, as yet has no dealer group licence. However, Vow plans to attain its own licence in time.

Vow chief executive Tim Brown said the group had always planned to make a push into financial

planning, with a particular focus on the property sector.

“It will enable our brokers, if they chose to do so, to fill in all those voids involving property transactions, such as risk insurance, investment advice and superannuation,” Brown said. “In short, our brokers will be able to comprehensively build and protect their clients’ assets while protecting their client from other cross-sell opportunities,” he said.

Brown said 70% of Vow’s brokers were likely to use the new relationship for straight referrals, while a further 20% had indicated they would want to offer limited financial planning advice, such as risk insurance, but not a full range of financial planning services.

Vow revealed about 10% of brokers in its network will undertake to become financial planners, with Vow Wealth to assist them in their desire to become fully qualified. “What has surprised me as I talked to our brokers was how many of them really wanted to get into this field to diversify their businesses and develop other revenue streams,” Brown said.

“There’s also been a sentiment among brokers that financial planners have been encroaching on their territory, and as such we believe this strategy will help brokers quarantine their clients.”

The launch of the Vow Wealth business follows the addition of vehicle and equipment finance services to the aggregator’s suite earlier this year. While the former

Tim Brown

Newcastle-based National Brokers Group had previously provided these services, Vow extended them to its wider network, via lenders Westpac, CBA, Esanda, Capital Finance and Macquarie.

RBA reprieve may be short-lived

Inflationary pressures continue to mount on the RBA following April’s decision to leave the official cash rate untouched.

The Australian Bureau of Statistics indicated in April the CPI rose 1.6% in the March quarter, compared to 0.4% in the December 2010 quarter. The result represents the largest quarterly rise since June 2006, and puts the CPI for the year to March at 3.3% compared to 2.7% for the year to December 2010.

The result has led to predictions that the RBA may move on rates earlier than expected.

However, in explaining the Bank’s decision to sit on the sidelines at its May board meeting, RBA Assistant Governor Phillip Lowe said spikes in the CPI could be attributed to production losses as a result of natural disasters.

Lowe said inflation is expected to fall as these effects work their way out of the economy.

“The Bank expects that, as the temporary price shocks dissipate

over the coming quarters, CPI inflation will be close to target over the year ahead,” Lowe said.

The mortgage industry praised the rate hold, but warned that more rate pain may be ahead for mortgage holders. Mortgage Choice spokesperson Kristy Sheppard said borrowers should brace themselves for a rate rise as inflation ramps up on the back of low unemployment and a strong Australian dollar.

“This is likely to be temporary as interest rates are predicted to rise alongside living costs over the next six months. Employment is at a two-year high, petrol and other living costs are rising and the latest inflation figures were up on expectations. The combination of and outlook for these and other economic factors will place mounting pressure on the Reserve

Bank to lift the cash rate,” she said.

Backing up Sheppard’s predictions was Lowe’s statement on the Board’s decision. Lowe indicated that the decline in inflation may be over, and that underlying inflation may begin to move above the Reserve’s 2–3% target band.

“Looking through these short-term movements … the recent information suggests that the marked decline in underlying inflation from the peak in 2008 has now run its course. While the rising exchange rate will be helping to hold down prices for some consumer products over the coming few quarters, over the longer term inflation can be expected to increase somewhat if economic conditions evolve broadly as expected,” Lowe commented.

AAMC launches file auditing service AAMC Training Group has launched an auditing service to help brokers navigate compliance Jeff Mazzini and disclosure requirements.

The file checklist service will prepare brokers for an ASIC audit by reviewing client files and issuing a report card for each file. AAMC general manager Jeff Mazzini believes the service will help alleviate the fears some brokers

harbour surrounding compliance.

“Finance brokers really need to understand what they are doing is okay, and [if it] would meet with what the regulator is looking for, and how they would stand up with an inspection or visitation from ASIC,” Mazzini explained.

Mazzini said the service will not look at the details of specific loans, but will rather ensure the total client file meets ASIC’s standards.

“It’s not about us assisting clients with what loan fits best or if the application fits the lender’s criteria; it’s about us viewing the

completed file, and what process they have used, what disclosures and selections have also taken place,” Mazzini said.

Mazzini believes the service will be a welcome relief for brokers. He commented that many brokers can face frustration when trying to ascertain what ASIC will expect out of client files and documentation.

“When brokers go and ask ASIC, ‘What do I do?’ ASIC will say ‘Refer to RG 209’. They’re not giving them what they’re looking for,” he said.

However, Mazzini believes existing disclosure regimes and

processes in the financial planning industry can provide a guide for brokers.

“So much unnecessary debate goes into the process when in fact there is already a well-oiled process in place through financial planners,” he commented. “All that has happened now is that ASIC has recognised credit as a product. So simply adding the credit product to the process does not require a massive reengineering of the existing forms or processes already tried and tested.”

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Analysis

A balancing act: Advising without overstepping More and more brokers are positioning themselves as credit advisors, but does an ACL really qualify brokers to give advice, and what will ASIC have to say about it?

W

ith the new licensing regime now a reality, many brokers are using the added credibility the industry has received through regulation as a marketing point to clients. Rather than falling back on the mortgage broker moniker, some brokers are repositioning themselves as ‘credit advisors’.

In addition to serving as a marketing device, the name also reflects the changing role of mortgage brokers as the industry diversifies to include insurance, superannuation and expanded credit products. Brokers offering more holistic financial products no longer see themselves as merely writing loans, but rather offering comprehensive credit advice to address a range of borrowers’ needs.

However, does an ACL really position brokers to offer advice? Where does advice on mortgage and credit products cross the line into financial planning?

Toeing the line

At a recent FBAA training day, several brokers asked an ASIC representative if brokers could appropriately advertise themselves as credit advisors, and just how much advice they were authorised to give. They were repeatedly given the rather enigmatic response to refer to RG209. So where is the line between an ACL and an AFSL? Outsource Financial CEO Tanya Sale has warned that the line is reached when brokers begin advising clients on where to invest their home loan.

“Once they start advising the client on where to put their funds, how to structure their facilities, what return they could see if they were to invest in a certain product, then all of a sudden they could be crossing the line to financial planning,” she said. “They are there as a mortgage planner and that is what they must stick to unless of course they have the relevant licences for the other.”

Sale predicted that brokers who do cross the line into offering financial advice could find themselves drawing unwanted attention from ASIC. “ASIC has subtly indicated that the mortgage writer is not to cross the line into other areas where a licence is required. In relation to cross-selling, that is fine as long as it is a streamlined referral, no-advice process,” she said.

AAMC Training managing director Jeff Mazzini agreed, and said an ACL only authorises brokers to advise which credit product is best for a client’s goals, not how to invest that product.

“A broker must make it clear to the clients that his role is only to provide the best loan product that meets the client’s needs and not advise past that point. Should a broker then advise clients what is the best thing to do with the loan monies, then he would certainly draw regulatory attention,” Mazzini said. “I sit on the state administration tribunal and hear cases against brokers and quite often the issues have arisen once the broker has advised clients to invest in products or services that they are not licensed to, [such as] investment property.”

Mazzini has predicted, however, that the line between financial planning and broking will become increasingly blurred as regulation comes into effect. “It’s already happening now as more financial planners, real estate

[agents] and accountants are adding credit advice to their service offerings,” he remarked.

Mortgage brokers as mortgage planners

This blurring of the lines notwithstanding, the Mortgage Planner Group’s Darryl Benn said that not all advice is currently off-limits to brokers, particularly if given in relation to mortgage offset. Exempt under the AFSL regime by a special ASIC order, Benn said conversations around offset accounts provide “valuable information on how clients can reduce the interest burden on their mortgage”.

“This advice from my perspective appears in line with the sentiments of the recent changes banning exit fees to provide borrowers greater freedom to obtain better interest rates, in effect interest savings as is achieved when using certain offset banking accounts,” Benn said.

“To achieve such savings it is important that the borrower understands this product and as such structuring to achieve the maximum savings is part of the loan transaction service.”

Benn added that providing ‘advice’ is an important part of other aspects of a ‘mortgage planner’ service, as it assists clients to better understand their options. “For example, just because a product has an advertised low interest rate, it may not be the most suitable, and the client may in effect be paying more interest should they select the lower rated loan,” he explained. “Skilled mortgage planners can and should point out the differences and savings that can be achieved using various structures.”

However, Benn said mortgage brokers need to be careful that they do not cross the line into AFSLgoverned activities.

Up-skill to up-sell

The vague nature of this line, though, may lead some brokers to seek further qualifications in order to safely operate on both sides of the balance sheet. Sale believes many may choose to hold an AFSL as well as an ACL in order to capitalise on opportunities in financial planning.

“There will be many mortgage businesses that will now incorporate both as it would be hard to sit in front of a client having all their information to hand and not being in a position to assist overall. What I can see is that mortgage writers will look to add financial planning to their qualifications and financial planners will add mortgage writing to theirs,” Sale commented.

To do this, though, brokers will need further qualifications. Mazzini remarked that the current educational requirements for brokers do not properly position them to give advice to clients, and predicted that, as the boundaries between financial planners and brokers blur, new educational requirements will emerge.

Gaining the proper qualifications to offer financial advice will allow brokers to “value add to their clients and be in a very strong position to offer a fee for service model”, Mazzini said. However, this does not mean every broker will need to hold both an ACL and AFSL in the future. Mazzini said many brokers will be able to serve as credit reps under licensees who hold both licences, and utilise the resources of their licensee to actually deliver a range of financial products and advice to clients.

“Many say they do not want to have to do that work, they don’t have time, but it’s just about being qualified to talk the talk, gather the information and having great back office services to undertake all the work and prepare required information for the clients,” Mazzini said.

Tanya Sale

ASIC has subtly indicated that the mortgage writer is not to cross the line into other areas where a licence is required

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Comment Viewpoint

Do mortgage managers have a future after the ban on DEFs? Our industry pundits give their take on the likely future competitiveness of the mortgage management sector

Barrie Gaubert

Andrew Hawking

Kym Rampal

Iden

Mortgage Choice

LoanKit

On the DEF ban: We are concerned about DEFs going.

Customers could think of mortgages as being more of a product, and they might skip every 12 months, and if that occurs, it’s not good for the industry.

On increased clawbacks: I think it’s fair to pay the broker and I think it’s very unfair to be actually clawing back on them in the first 12 months, so we are trying to find a way to live in the new regimen that allows us to avoid the DEF if at all possible, and we’ll continue until we find that solution.

On the mortgage management proposition: We are reinventing ourselves and reinvigorating ourselves and resourcing ourselves with new staff internally and externally so we can actually reconnect, and we have been on that growth path now for 18 months, and we’ve seen volumes kick up quite a lot. But it’s also the fact that not everybody is always satisfied [with major banks]; they can’t ring the managing director of Westpac if they have a grievance. That happens here. So we deal with it on a much more personal basis.

Do mortgage managers have a future?

The ones that have gone through the GFC like us and survived will continue to grow and develop and there is a big future for all of them. Whether or not there is going to be brand new people coming into the industry as readily as they have in the past is questionable. It’s a lot harder now and there are bigger barriers for them.

On the DEF ban: Within the Mortgage Choice offering, it is still state of play.

We haven’t been formally advised what they are likely to do in regard to implementation of this DEF ban. So interest rates are still very competitive, and application fees are still quite competitive, so it is business as usual in regard to DEF fees.

How can mortgage managers adapt? What they actually have to do is think about what they are going to offer, how they are going to offer it to the actual public, and also to the brokers themselves. If they go through and hike fees, hike interest rates, and also have an extended clawback period, with brokerage, then it’s not going to be as attractive to the client and also to the broker as well.

On the future of the sector: They’ve actually had to reinvent themselves dramatically over the last 12–24 months. During the GFC, what most mortgage managers actually did was identify certain niches in the market, which they could actually service well. And that’s where mortgage managers really do serve the population well – in the little niche markets that we have.

Are mortgage managers competitive? Their rates are a little lower than most major lenders. They did not raise their rates as high during the last rate rises, where other lenders raised higher than the cash rate rises, so yes they are competitive.

How can they adapt to the ban? A new way of doing this is to absorb that DEF into the loan itself and then repay it slowly to the borrower over time. So if the borrower remains for the first year, a part of the loan is then given back or credited back so that it drops the loan balance, and at the end of year two, the same thing happens. The longer the borrower stays, the loan balance reduces by the amount deferred.

On the mortgage management proposition: What’s happening with the major lenders is brokers don’t really get access to their credit officers who are making the decisions at the moment, and it slows down the process, it inhibits a broker’s task of being able to explain the client’s circumstances and why this deal is a deal. Mortgage managers can still do that; they can still reach the credit officer which means the deals are treated more with respect rather than according to policy.

Rewind: Squeeze to hit manager margins Earlier this year, Carrington National CEO Gino Marra said mortgage managers will need to adjust to reduced margins if they are to keep their rates and broker commissions steady under the exit fee ban. Marra said many players will be under pressure to hike rates, or introduce clawbacks. “You need a competitive product to win business from the consumer, but you need a competitive commission structure to win business from brokers – so it’s a very fine balancing act,” he said.

Is inflation a growing problem?

Westpac senior economist Justin Smirk presents the bank’s outlook for inflation Q1 inflation was elevated

The 2011 Q1 CPI surprised with a sharp 1.6% quarter rise, taking the annual pace to 3.3% for the year, well through the RBA inflation target range of 2–3%. Nevertheless, the CPI revealed an interesting mix of falling prices, in particular discretionary items, which are under deflationary pressure from the strong Australian dollar, versus rising fresh food prices, higher fuel prices, the seasonal rise in pharmaceuticals and education, and rising housing costs.

Core measures picked up

The core measures also revealed a sizeable pick-up in inflation. The trimmed mean rose 0.9% for the quarter, while the weighted median rose 0.8%, both a touch stronger than what we or the market had been expecting. However, as the core measures rose a very robust 0.8% in 2010 Q1, the annual pace for the average of the two rose to 2.3% for the year.

Food spiked on disaster impacts…

In regards to food prices, the natural disasters of Q1 more than offset supermarket price wars. Fruit prices rose 14.5% for the quarter. Vegetable prices rose 16%, and lamb prices rose 6.7%. A supermarket price war provided an offset with falls in milk, bread, cereals and beer.

… and fuel was much higher

The commodities boom showed its stripes in the form of rising petrol prices, which lifted 8.8% for the quarter. When combined with a 1% rise in urban transport fares and a modest fall in vehicle prices, total transport costs rose 2.7% for the quarter. Looking forward, if petrol prices stabilise at current levels, then they will rise by around 5–6% in quarter two.

Housing pressures are rising

Total housing costs rose 1.3% for the quarter, with the main contributors being a 5.1% rise in electricity charges, a 1.3% rise in rents

and a 0.8% rise in house purchase costs. It is becoming clear that as housing affordability is squeezed, the pressure is shifting from house prices to rents. This is likely to be sustained through this year, if not accelerated further.

A slight decrease in core pressures

Will the strength in the CPI be repeated in quarter two? While we accept the disinflationary period has passed, we don’t think Q1 represents the start of a significant acceleration in the trend for core inflation. The key top down factors behind this assertion is soft domestic demand (as represented by a still disinflationary output gap) and a rising Australian dollar, both of which will maintain downward pressure on discretionary goods. There should be a partial offset from rising petrol prices, rents and other housing costs, but not enough to drive the rate of increase materially above Q1. Our forecast for Q2 is 0.7% for the quarter, and 3.4% for the year.

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23

OPINION

Can a negative become a positive?

Joseph Trimarchi of Joseph Trimarchi & Associates asks what the new positive credit reporting regime will mean for brokers and their clients As comprehensive credit reporting (or positive credit reporting) is set to be launched in Australia, it would be useful to discover the impact this will have on both borrowers and lenders.

Currently, only negative information is recorded on a credit file. Comprehensive credit reporting empowers lenders to list a borrower’s good qualities, not just the bad. The million-dollar question is: how will the introduction of the new system change from the old and preserve the rights of the consumer? Or will the consumer once again be short-changed?

By way of background, as part of the 2007 election policies, the government announced it would give serious consideration to recommendations made by the Australia Law Reform Commission as to privacy, in particular, credit reporting.

The reforms are significant and have been released as part of draft provisions to be adopted as part of the new Australian Privacy Principles. Currently, the draft reforms have been referred to a senate committee for consideration. Once considered by Senate, the reforms shall be introduced to parliament who shall have the power to make the reforms law. Legislation as to reform is inevitable and is likely to take effect some time in 2012.

Essentially, the main feature of comprehensive credit reporting is the additional information able to be recorded on a credit file. There are five additional pieces of information being added: type of account; date the account was opened; the date the account was closed; credit limit placed on the account; and the repayment history.

Our current system provides for accounts which are 60 days or more in arrears to be listed as a default on a credit file. The new regime provides for expanded information to be recorded, and the proponents of this system tell us this will provide clearer and more precise insight as to credit worthiness. In addition, they argue this additional information is essential if lenders are to comply with stricter responsible lending practices, and as such benefits will flow to both lenders and borrowers.

Recently, a great deal of hype and commentary was released about this topic.

Sufficiently agitated are the arguments in support of the new proposals, together with augments which detract from the new regime, in particular the concept that marginal borrowers shall be prevented from borrowing in the future. Of little concern to all commentators is the recording of information on a credit file with sufficient precision so as to avoid information being recorded on a credit file which is inaccurate and not up to date.

The proposed legislation fails the consumer in that it has not adopted more stringent requirements as to the accuracy of information being published. Common sense dictates additional information being allowed to be recorded would increase the prospect of such information being wrong. For too long the system has relied on credit providers to report accurate information. Credit providers are motivated by the collection of their debt – they are not motivated by the needs and rights of consumers in having their credit file depict a true picture as to credit worthiness. Further, the new proposals once again are a cause for frustration in that there is a distinction drawn between consumer and commercial credit. Commercial credit has been hung out to dry and is not legislated for.

Finance professionals are cautioned to place higher significance on the importance of the information contained in the client’s credit file when advising their clients on matters of finance. A credit check should be conducted at the very beginning of the retainer prior to lodging an application for finance, so as to avoid nasty surprises. The finance professional should be equipped with sufficient understanding as to the workings of a credit file and how to identify mistaken entries which may cause their client to be declined for a loan. An alliance with companies who specialise in repair of credit files is imperative if more loans are to be approved. Only time will tell us the true impact the new credit reporting legislation will have on borrowers.

The opinion expressed in this article is that of Joseph Trimarchi, solicitor of Joseph Trimarchi & Associates, a law firm specialising in Australian Credit Reporting Law

Borrowers ‘oblivious’ to credit file contents Some borrowers may be unaware that certain aspects of their debt history will reflect on their credit report, Mortgage Choice has claimed. Company spokesperson Kristy Sheppard said borrowers may not know that missed bill payments and previous loan or credit card applications will be included. “One or two debt-related mistakes, such as a missed or late bill payment, are often enough reason to be denied a home loan,” Sheppard said. She commented that younger borrowers are particularly likely to be “oblivious” to these events.

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Comment OPINION

NCCP: The next 800 years What do the centuries-old English ‘Distress Act’, white Slovenian sausages and the NCCP have in common? As our resident futurist Kym Dalton argues, it’s all about the consumer Now I’m sure we’ve all heard of the Magna Carta – where the English Barons forced King John to sign a document that limited some of his powers.

Not long thereafter – in 1267 in fact – the ‘Distress Act’ came into being to extend and clarify some of the points in the Magna Carta.

The Distress Act basically stipulates that it is illegal to obtain recompense for damages other than through the courts. It had very narrow intent and was meant to stop the gentry and the rich arbitrarily oppressing those not so fortunate.

This Distress Act is the oldest un-repealed act in the UK. Reference to the web will indicate that the Act is still relied upon as precedent in damages cases in that country –some of significant complexity and involving large sums of money.

Now, I put it to you that a bunch of guys in chain mail in a muddy field could not have foreseen that ‘their’ Act would still be being interpreted by courts some 800 years hence.

Our system of law relies on statutes being interpreted by the courts; thereby building up a body of precedent that serves to influence subsequent decisions on matters brought before the court.

It is the courts that will give form and substance to the NCCP. This is expressly stated by ASIC (eg, RG209.61 “The law about the meaning of ‘substantial hardship’ will develop and become clearer as cases come before the courts and judgments are handed down”).

Until now, much of the industry focus has been on what ASIC as regulator may do or may not do in regard to the NCCP. It matters little whether ASIC is a friendly giant, a cuddly bear or Scrooge McDuck. ASIC certainly has supervisory powers and an oversight role; however, the primary purpose of the exercise of these powers will not be to punish or circumscribe the activities of credit industry professionals – it will be to protect consumers.

A dead giveaway is the name of the Act itself – it is, after all, the National Consumer Credit Protection Act! Review most of the prior commentary in this and other industry publications and you’d be forgiven for thinking that the Act was called something like the ‘Broker Licensing Act’ or the ‘Consumer Credit Disclosure Act’.

Much of the discussion to date has been centred on how to act mechanically to ‘get licensed’ and how to avoid the ire of ASIC in the future. There has been insufficient attention given to whatever behavioural and attitudinal modification will be necessary to ensure consumers aren’t disadvantaged, don’t complain to EDRs or don’t bring actions before the courts to the detriment of credit industry professionals.

Some clues as to the potential future direction of the NCCP can be gained by examining decisions relating to the

Contracts Review Act (NSW 1980). Reference to the court records or websites of a number of law firms will detail numerous judgments where mortgages have been set aside in whole or in part.

Certain themes predominate – brokers deemed to be agents of a lender, undue influence or duress, low-docs, ‘asset lending’, lack of proficiency in English, proceeds of loan funds for the benefit of others and very often, what may be termed the ‘suspension of disbelief’ on behalf of representatives of brokers and lenders.

Critically, adverse judgments under the Contracts Review Act have usually derived from wilful or negligent behavioural defects as opposed to ‘mechanical’ errors of disclosure or fact.

So it will be with the NCCP. Our industry just hasn’t focused enough on what types of behaviours will cause consumers to consider that they have been disadvantaged.

The concept of reasonableness permeates the Act. The principal definition of ‘reasonableness’ is “showing reason or sound judgment”.

The NCCP is virgin territory for the courts. ASIC’s guidance is principles-based, not rules-based.

Principles such as ‘honesty, efficiency and fairness’, ‘reasonable enquiries’, ‘reasonable steps’, ‘not unsuitable’, ‘substantial hardship’ and ‘scalability’ will evolve and be subject to interpretation by the courts as consumers bring claims for compensation.

This evolutionary process will take time – but it’s reasonable to forecast that the process of natural selection by the courts will trend towards favouring the consumer – this has certainly been the case in the various forms of consumer protection-type legislation that has predated the NCCP. The Distress Act is about 300 words on one page of parchment – and the damages dealt with would have been things like a commoner’s prize pig being bowled over on the King’s Highway. One doubts that they could have foreseen how the Act could apply to a case involving a Slovenian lorry full of white sausage damaging a crosschannel ferry.

Credit industry professionals would be well served to keep abreast of environmental, demographic, societal and economic trends so that they may anticipate how the NCCP and its interpretation by the courts may evolve.

It should be noted that the body of the NCCP is 488 pages in length – so there’s plenty of material for the courts to work with over time.

Let me be clear – overwhelmingly, it will be consumers seeking compensation via EDRs and the courts that will cause credit professionals grief in the future – not ASIC. Over the next 800 years I’d urge credit industry professionals to spend less time worrying about what ASIC may or may not do and spend more time focusing on what consumers hear, need and understand.

Remember: The Future isn’t what it used to be.

ASIC certainly has supervisory powers … however, the primary purpose of the exercise of these powers will be to protect consumers

Kym Dalton kym.d@futurology.com.au

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Comment

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FORUM FBAA president Peter White incensed a number of brokers when he suggested broker commissions could follow those of financial planners in being banned As usual, brokers constantly focus on their income stream rather than the services they should be providing to justify it. Get the service model right and it won’t matter whether the remuneration is commission or fee-for-service. The service provided will be seen as worth it. The same cannot be said for many brokers who are focused on commissions, not service.

Observer on 02 May 2011 01:05 PM The financial planners were paid a commission dependent on their advice and based on their projected earnings.

Mortgage brokers are very different. We don’t advise; we provide what we think are the best options [for the client]. A set brokerage fee would be a good solution.

Brian Hastings on 02 May 2011 01:09 PM Financial planners are paid out of the earnings that the funds invested return and/or the management fee charges for that investment by the investment house. Finance brokers are paid by the lender from the lender’s earnings. Also note that the client is not paying a higher rate for dealing with a broker, except if that broker is a mortgage manager, in which case his or her rate must still be competitive. Does Peter White understand the difference? countrybroker on 02 May 2011 01:24 PM I would like to see the associations lobby the government/ASIC to set up a commission-based system that they are happy with. That will then take away the concerns that commissions will go. The FBAA states that it has a unique position (compared to the MFAA) in where/how/who it lobbies – the question is: Mr White, are you up to the task? Now that would be a feather in the association’s cap and, dare I say it, stop all the whinging about the role of an association.

Ozboy on 03 May 2011 09:31 AM

Fee-for-service was once again causing a polarity of views, following Intellitrain’s well received webinar on the topic, attended by a large contingent of brokers Enough of this talk about fee-for-service.

Intellitrain have an agenda to sell more training courses. The banks have an agenda to pay us brokers less money. The industry bodies really don’t care either way as they are either in bed with the banks or will collect members' fees no matter what happens and the aggregators just don’t seem to be making enough noise, as now a large number of them are owned by banks also. Yes, we do provide a better service than the bank staff; yes, we do offer our clients more; and yes we are all professionals but to think you can justify charging a client a fee when they can go down the road and get the same deal for nothing is just plain ludicrous. To my fellow finance brokers, we and not the lenders or the training companies need to decide which model we want. I am seeing far too much commentary about how we have to go to a fee-for-service model or perish. Lobby your aggregators to stop this now, or there will be many more brokers leaving the industry and going back to work for the lenders on lower pay as they will be the only ones writing loans. cougars1 on 29 Apr 2011 03:42 PM Been charging a fee for over three years now; have only had three people not pay out of an average of 12 settled loans a month. Didn’t miss them. No one has ever complained about the fee charged and some have commented that it was too cheap. We charge between $300 and $1,500 depending on the type of loan and complexity. I have no control over banks, aggregators or clients but I do have control over my business, so I will operate how I see fit and as long as my clients are happy, that is all that matters to me. If you believe (or offer) the same service as a bank then yes, it is probably time to move out of the industry, but I don’t know too many brokers who do. No point asking anyone to lobby on your behalf if you believe that charging is wrong: lobby yourself, put some

money behind your beliefs and start a campaign, or better yet, why not join a ‘refund model’ and give away your knowledge and skills for next-tonothing. At the end of the day, if you don’t value your skill set, neither will anyone else. I wish you all the very best for the future.

Ozboy on 02 May 2011 10:53 AM

Meanwhile, one broker indicated his clients had been declined based on age, following guidance from ASIC that said this should not happen if they have the ability to pay Have just had a loan knocked back because of age. The end loan was to have a lesser repayment than the rent they are paying. While rent will continue to increase, loan repayments will stay about the same. If in the future the clients have difficulty affording the rent, maybe they can come back at this lender, blaming them for the problem they are then in.

Allan Faint on 21 Apr 2011 11:59 AM

Survey: MPA Brokers on Aggregators MPA’s recent Brokers on Aggregators Survey revealed mixed attitudes to aggregation businesses. Here are two of the highlights: Are you looking to switch aggregators?

Yes

12%

Yes

75% No

25%

No

88%

Are you paid accurately and transparently?

To vote in our latest online poll, visit our online home page at www.brokernews.com.au

Source: MPA Brokers on Aggregators Survey, MPA issue 11.5

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Market talk

Where should we house Australia’s growing population?

With Australian capital cities expanding further and further from city centres, are developers focusing on demand or profitability?

People believe housing in the outer suburbs will be the affordable housing they need. That may not be the case – Dr Carolyn Whitzman, University of Melbourne

D

evelopers and real estate industry groups often lament the slow release of land for development, blaming the government for holding up greenfield sites with too much red tape. Many industry groups claim the low volume of land release is a major culprit behind plummeting affordability in the housing market. But does the answer lie in further development on the fringes of capital cities? Will urban sprawl really put home ownership within the reach of everyday Australians?

Counting the costs

Dr Carolyn Whitzman, associate professor of Urban Planning, University of Melbourne, does not believe fringe development is the answer to providing affordable housing. “People believe housing in the outer suburbs will be the affordable housing they need. That may not be the case,” Whitzman said.

According to Whitzman, large mortgages, higher transport costs and distance from amenities all add up, and show that living on the city fringe is not the path to affordability. Moreover, the Great Aussie Dream of owning a home with a big backyard is not provided by fringe development. Whitzman said the type of housing being built does not reflect demand.

“Large lots aren’t even being provided. It’s big houses on relatively small lots of land. They’ve been built at the expense of the backyard. Is that fairly reflecting demand when average family size has been going down since the middle of the 20th century?” she said.

Rather, Whitzman believes in-fill development in existing suburbs will better reflect buyer demand. The reason this isn’t happening, Whitzman said, is a simple matter of profit margins for developers.

“Why aren’t developers focusing on in-fill development?

Because of cost. It’s more expensive, and land acquisition is more difficult. It’s easier and cheaper to build greenfield developments,” Whitzman commented.

In spite of being cheaper and easier, greenfield development can carry with it some troubling long-term costs, Whitzman claimed. While eroding environmental sustainability through increased reliance on cars, fringe suburbs are also taking up prime agricultural land. With 75% of Australian fruits and vegetables grown at the fringes of capital cities, Whitzman said urban sprawl could be eating away at future food security.

Residex CEO John Edwards agrees. He commented that the cost of losing agricultural land will lead to a difficult future for many dwelling on the suburban fringe.

“Vegetable prices go up because there’s not the land required on the fringes to provide the agricultural goods that are needed in the cities,” Edwards said.

Filling in the gaps

Medium density housing in existing inner suburbs, Whitzman said, is the key to sustainably addressing

housing demand. While many critics of urban density argue against the idea of cities dominated by high-rise apartment blocks, Whitzman said this type of highdensity living is not necessitated by in-fill development.

“Usually the debate is put in a very stark way, like you can either build a 90-storey high-rise or you can build suburban tract housing. There’s a happy medium to be found there. It’s already worked in Canada, the US, Europe and in many other developed countries,” she said.

As homebuyer demographics change, Whitzman stated that there is an increasing focus on proximity to the amenities of the CBD. Younger buyers place a high value on being within easy reach of all that the urban environment has to offer, she said. “It’s proximity to jobs, and leisure and public transport, and the inner and middle suburbs are where all of those things are.”

As a result, Whitzman said governments should no longer focus on outer suburb land release. She believes governments should create incentives for in-fill developments, while creating disincentives for fringe suburban expansion.

Building from the ground up

However, Edwards does not agree that medium density housing is the best option for Australia’s growing population. “There are as many arguments against that as there are for it. It has infrastructure implications. Can you actually upgrade infrastructure to cope with the situation you’re causing through medium density housing?” Edwards asked.

Instead, Edwards believes the future of housing expansion lies in regional areas.

“We ought to take the pressures off our cities and leave them alone. The government needs to provide incentives to corporations to provide jobs in regional areas,” he said.

“I don’t agree that the solution is fringe suburbs or higher levels of medium density housing, though I do agree medium density is the much better short-term solution.”

Edwards used the example of Canberra, a city purposefully built in a regional area which has now become a metropolitan centre.

“Why did it work? It worked because there were employment opportunities for people, and it provided infrastructure needs. If it worked in Canberra, it can work elsewhere,” he commented.

Regional development, Edwards said, provides the opportunity for governments and corporations to build infrastructure with purpose, and to supply sustainable energy that will adequately provide for the needs of the population. This, in Edwards’ opinion, is the path to sustainable and affordable housing development.

“Somewhere along the line someone has to bite the bullet, because what will we do in 20 years’ time when there’s no more room for medium density housing? We have to take a long-term approach and start to move the population away from major capital cities,” he reasoned.

www.brokernews.com.au

27

Number crunching How Australians see their financial position Short term debt

Servicing snapshot: How Australians fare in repaying their mortgage

Long term debt

51%

Household income

3%

46%

Behind on payments

Household savings Payments on schedule

Assets/Investments Household bills

Source: ING Direct

0 Very uncomfortable

20

40

Average

60

80

100

Very comfortable

Ahead in payments

42% At a glance…

*

The proportion of first homebuyers who consider Australian property significantly overvalued Source: QBE LMI

Market news in brief Residential land sales plummet The HIA-RP Data Residential Land Report has indicated a sharp decline in land sales volumes for the December quarter. The report found sales volumes decreased by 40.4% compared to the December quarter 2009, falling to their lowest level in a decade. Meanwhile, HIA economist Matthew King said median land values have risen 5.9%.

“The escalation in land values highlights an ongoing deterioration in new home affordability driven by constraints on supply. The sharp drop in the volume of land sales signals a very weak 2011 for new home building,” King said.

CommSec tips strong ACT The ACT has shown economic output for the quarter 21% above its long-term trend, beating other states and territories in CommSec’s latest State of the States report. Western Australia has come in at second, buoyed by strong business investment and economic growth, but weighed down by its sagging housing market.

Low unemployment, strong retail spending and new home building brought Victoria in at third place on the survey. NSW has lagged behind, with growth only 9% above its 10-year average. Flood-affected Queensland has also performed poorly, coming in at the bottom of the list due to above average unemployment and a weak housing market.

Price decline hits Melbourne Melbourne’s median house prices have seen a 6% drop in the March quarter, the Real Estate Institute of Victoria has indicated.

The Melbourne median house price for the March quarter has come in at $565,000, down from December’s median of $601,000. REIV CEO Enzo Raimondo blamed the Melbourne market’s decline on worsening affordability.

“This is due mainly to affordability constraints, affected by the seven rate rises since December 2009 and particularly following the November increase. Note that most years the median price reduces in the March quarter due to the lower activity in January,” he said.

REIA spruiks FHOG boost In its pre-budget submission, the REIA has suggested a raft of measures it claims will increase housing affordability. In addition to increasing the First Home Owner Grant, the group has called for a retention of negative gearing, a commitment by the government not to increase capital gains tax on property investment or institute the tax on owneroccupied homes, the removal of stamp duty and access to superannuation to purchase homes.

Property investors shun disaster zones A new report by insurer QBE has revealed that, before the spate of natural disasters hit at the

beginning of the year, property investors made up 71% of respondents considering buying properties in the areas subsequently affected.

Post-disaster, the proportion of investors still interested in buying had fallen to 32%.

The QBE report also revealed rising concern over interest rates, with over a quarter of respondents considering themselves to be under mortgage stress – although only 2.3% said they were unable to meet repayments. However, a 0.25% rate rise would leave 11% unable to pay their mortgage, and an increase of 0.5% would see 23% default on payments.

Flood of stock will lead to falling prices Unsold stock in Melbourne is skyrocketing, a property research firm has stated.

SQM Research has indicated that stock on market in Melbourne has risen 60.9% since April 2010. The company has predicted record drops in Melbourne house prices as a result.

According to the company, stock around the nation’s capital cities is on the rise, with every capital city recording year-on-year growth in unsold stock. SQM managing director Louis Christopher said SQM is predicting an overall decline in house prices for 2011 as more stock sits unsold. “We believe the ABS is likely to report house prices falling by more than 5% for this calendar year, with the falls led by South East Queensland, Perth and Darwin,” he said.

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Insight

Link in or get left out Social networking sites, including professional network LinkedIn, can provide better sales prospects than ever before.

Sales guru Sue Barrett shows you how to get connected

W

ith social networking sites and the plethora of online data available, 2011 presents us with better quality prospecting and more qualified prospects. Business networking sites such as LinkedIn and Plaxo, and the emergence of Facebook and Twitter as business destinations, give the discerning salesperson access to quality data where they can research key contacts, as well as business activity.

Then, when appropriate, they can use this data to make professional connections.

Smart salespeople are using social networking sites as tools to engage in better quality prospecting and improve conversion rates rather than just using them to make a list of prospects. These sites potentially make redundant the concept of cold calling and the fear of prospecting, and can help people become exceptional prospectors. So how do you get the best out of social networking sites when prospecting? Let’s look at LinkedIn.

LinkedIn

For B2B prospecting, LinkedIn is proving to be a rich source of information, contacts, suppliers, prospects, referrals and clients. It has exploded in connections and content, and usage has skyrocketed in the last 18 months through its many features helping you get connected to the right people. It is the largest B2B social media networking group in the world. So how do you use LinkedIn to help you prospect more effectively?

Step 1: Develop a sales plan, clear message and profile Before you set up your LinkedIn profile, make sure you have a clear sales plan which identifies who you need to be connecting with, ie, types of clients, suppliers, peers, industry sources and groups. Think about what you want to present by way of image, message and purpose, ie, what do you stand for? What do you do for people? Look at how you would like to position yourself as a business professional. Like websites, your LinkedIn profile is your professional resume online; it represents your professional brand. It’s what you do, what your company does, what you represent. People are likely to make up their mind about you based on what they read about you.

Your LinkedIn profile should form part of your strategy.

Step 2: Join LinkedIn Get your profile up and live. It’s easy and it’s free. There are also various levels you can subscribe to in order to enhance your profile and get you better connected with search features and other options. These extras come with a monthly fee attached. Begin by using the free access option and try it out before committing to upgrades.

Step 3: Join LinkedIn groups There are many and varied LinkedIn groups you can join. These groups provide people with forums to discuss and exchange ideas and opinions, as well as keep up to

date on the latest trends, ideas and innovations. It’s also where buyers are increasingly looking to research their suppliers before they buy. They are looking for what others say about you and your products or your industry.

They can compare you with your competitors’ offerings.

In these groups, you can listen to what your customers are saying before they even decide to talk to you. Your sales strategy should guide you as to who you should be in contact with. But do not limit yourself to the narrow bandwidth of your own expertise. Often looking outside your comfort zone can give you access to new ideas and contacts as well. A word of caution: Do not blatantly selfpromote or advertise in these groups – it will not go down well. If you try to blatantly self-promote and prospect, you will be shunned and often kicked off the group.

Step 4: Start to connect The best way to build up your network of contacts is to invite people you know to connect with you. This way you can begin to build up direct connections who, in turn, can then give you access to people outside of your direct network. You can often look at your contacts list of connections and you can see who might be good to make contact with. It’s advised that you don’t contact someone you do not know directly without some form of personal connection or link; instead, you can seek an introduction through one of your direct contacts. Sending out LinkedIn requests to people at random will not be seen as good business and will be deemed inappropriate or spam by many and may affect your reputation. It is also wise to be discerning about which connections you accept as well.

Don’t just accept invitations from anyone, make sure you find out how you can be of best service to each other.

Step 5: Identify and research your prospects If you are already connected on LinkedIn and you know what types of people you need to prospect to, you can look through your contacts lists to see who is there. Your own CRM or client database should have lots of names you need to speak to. And, of course, you can buy other lists once you are on LinkedIn and begin to research your prospects. In the upper right hand corner, there is a search box with a pull down menu. Click on that and you’ll see six options (people, jobs, companies, answers, inbox, groups). Click on ‘people’ and enter the prospect’s name. You will be able to see a lot of information about prospects there.

Step 6: Start prospecting Develop a list of 20–40 prospects per week and then make contact via the telephone as you would normally do. Use relevant business reasons to help you connect. Pretty soon you will be making contact with the viable prospects and on your way to making more sales. If you are still not comfortable calling people via the telephone, use LinkedIn as a prospecting option, but make sure that you still use strong business reasons in your invitation to them.

Summary Does this mean you will learn everything about a person via their profile or that you take a carte blanche approach to prospecting? No. We will need to be mindful about how we go about making contact as we will still need to engage in skillful prospecting activities to position ourselves effectively. Remember, information is not power, it is potential power. LinkedIn and other social media networks are not the only sources for prospecting.

Sue Barrett is the founder and managing director of sales training and consulting group Barrett

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Toolkit

Getting the right PI protection NCCP means that robust PI insurance has become more critical. Insurance specialist Darren Loades explains how to ensure you are covered for every eventuality

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hese days it is clear beyond any doubt that finance and mortgage brokers, originators and managers need to carry professional indemnity (PI) insurance, regardless of whether they are conducting business subject to the new NCCP regime or not.

However, what is not particularly clear is what format that policy must take and what industry-specific conditions it must include. It is fair to say that at the moment there are quite a lot of insurers out there in the market offering cover for your industry, but are they providing all the required covers? Subsequently, what is automatic to their policy and what costs extra? The purpose of this article is to highlight some of the key features a PI policy should include, and for those who do deal in consumer credit, certain features that your policy must include.

Your PI checklist

Firstly, the policy should, wherever possible, be underwritten by a secure Australian-based insurer that is subject to both ASIC and APRA regulation. This ensures the insurer must carry adequate capital reserves in Australia to meet their claims, whereas an offshore-based insurer is not necessarily subject to such regulations and therefore might possibly not be around when needed!

Once the insurer is established you should give proper scrutiny to the definition of ‘Insured Professional Services’ on the policy; that is, exactly what activities the insurer believes they are covering you for. This is an extremely important point, as it essentially forms the basis of the contract between you and the insurer. For example, if you decide to offer insurance products in addition to your finance broking activities and neglect to advise your insurer of this, then in essence you will not be covered should a claim arise from this activity.

The insured professional services should therefore be as clear and detailed as possible to avoid any dispute in the unfortunate event of you having to make a claim on the policy.

Following on from this, your policy will then need to be ‘tailored’ to meet the specific requirements of your industry, especially for those operators who now fall under the new national licensing regime. Below I have listed some of the main features that your policy will need to include for it to be deemed ‘adequate PI Insurance’ by ASIC: • Minimum cover: It has to be for a minimum limit of cover of $2m for any one claim, with preferably one automatic reinstatement.

• ‘Run-off’ cover: It must provide at least 12 months’ ‘run-off’ cover in the event that you sell your business and/or cease trading. ‘Run-off’ cover is unique to Pl insurance policies due to the ‘claims made’ nature of the contract. That is, you must have a policy in force at the time a claim is made against you to be covered, so if you cancelled your policy and didn’t take up any run-off cover you would have no protection if a future claim

was made against you relating to your past services and activities. ASIC stipulates that you must carry at least 12 months of this cover, but in reality you need to carry it for seven years thereafter to have full protection. Most insurers will provide this cover but generally it is not an automatic benefit, but rather has to be purchased on a year-by-year basis once you leave the industry.

• ‘Fraud and dishonesty’ cover: The policy must extend to include ‘fraud and dishonesty’ cover, which most do, but generally speaking this cover is limited to the fraudulent and/or dishonest actions of employees only. What happens then if the act was committed by a fellow director/partner and/or an authorised representative of the business? Ideally, you want a policy that would respond in all these cases and not just limited to the actions of employees only.

• Authorised reps: For those operators who do have authorised representatives (ARs) working under their licence and wish to include them under their PI policy, you need to check and ensure that they are specifically noted as ‘joint insured entities’ on the policy. The standard policy will cover your vicarious liability as a result of their actions but not necessarily extend to cover the ARs themselves, unless specifically noted – you therefore need to check this point for both yours and the AR’s benefit.

• EDR awards: The policy also needs to be structured so that it will automatically respond to any awards handed down by any ASIC-approved external dispute resolutions (EDR) facility. Most policies will include a form of this cover but they can quite often be limited to, say, $100,000, whereas the Financial Ombudsman Service (FOS) for example has the authority to hand down awards of up to $280,000. Therefore, if your policy is not structured accordingly you will be responsible for coming up with the short-fall.

Avoiding the detail devil

So, in conclusion the main points I would leave you with are: • The days of operating without professional indemnity insurance are most certainly over!

• Given the specific requirements of your industry, especially under the new national licensing regime, you cannot simply purchase a generic ‘off-the-shelf’ style policy – it must be specifically tailored to meet your needs.

• Do not assume that your current policy will provide these specific requirements automatically because by and large they won’t, and that could leave you with a nasty surprise if you ever have to call on the policy for protection.

• Finally, and probably most importantly, take the time and do your research on this subject to ensure you fully understand what you are getting for your money. This insurance is an extremely important part of your business and you need to treat it as such. Remember, like most things in life, you get what you pay for and insurance is certainly in that category – so be aware and purchase accordingly.

Darren Loades is an authorised representative of Insurance Advisernet Australia

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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 Issue: Australian Broker 7.9 Headline: RBA: Banks’ share of market at its peak (page 6) What’s happened since: What we reported: RBA assistant governor Guy Debelle has predicted that the four major banks’ share of the home loan market has peaked and the industry will start to see the pendulum swing to other players. He said there are signs that the major banks’ share has already peaked and that there is evidence their share is declining.

Asked about his views on the outlook for the mortgage industry, Debelle said that brokers could expect housing credit growth of 7–8%, which is where it is at the moment. This is less than the 20% growth that was occurring in 2006 and 2007, he said, but that the new growth rates are more sustainable.

Major bank market share saw a decline this year as non-bank market share rose to levels last seen prior to the GFC, according to Australian Finance Group.

The aggregator’s February mortgage index shows that non-bank lenders accounted for 21% of all home loans processed through the group’s broking network, up on the 15.4% share of the market the sector claimed in the December quarter of 2010.

Debelle’s predictions of housing credit growth have been borne out, as mortgage growth saw a three-month annualised rate of 6.7% in February. JPMorgan banking analyst Scott Manning predicted that this lower growth rate is likely to continue for some time.

Headline: First homebuyers prefer brokers (page 8) What’s happened since: What we reported: The latest Bankwest/Mortgage & Finance Association (MFAA) Home Finance Index showed that satisfaction with mortgage brokers has increased to 7.5 out of 10 from 7.0 a year ago – widening the lead over the banks.

“This is a great result and we look forward to working closely with brokers to keep them at the forefront of buyers’ minds,” said Aaron Milburn, Bankwest head of broker sales. “Interestingly, the research shows it’s the 30 to 39-year-olds who will mostly likely use a broker, with just over a third (38.8%) saying they’d go straight to a professional when seeking out a home loan.”

The broker proposition has continued to gain in popularity, with more people saying they understand the benefits of using a broker than at any time since November 2008. According to the latest Bankwest/ MFAA Home Finance Index, 35.7% of people surveyed said they understood the benefits of the broker proposition. The result is up from a low of 26.9% in November 2008.

Awareness of the services brokers provide is at 78.9%, while awareness of brokers in general stands at 95%.

MFAA CEO Phil Naylor says the results indicate a growing consumer focus on the broker proposition. “We’re seeing consumers understand that broker benefits extend beyond the traditional realms of leg work and wider loan range,” Naylor commented.

Headline: AFG: Mortgage sales fall to $2.3bn (page 18) What’s happened since: What we reported: Mortgage sales fell by 15.6% between March and April this year as successive interest rates take hold, according to Australia’s largest mortgage broker.

The AFG Mortgage Index showed that the $2.7bn of mortgages arranged in March fell to $2.3bn in April. This is also 17.5% lower than the $2.8bn arranged in April 2009.

AFG brokers in NSW witnessed the largest fall in sales with the value of loans written falling by almost 20% from March. Queensland suffered the next biggest drop off with a fall of 16.4%, followed by SA (15.9%), WA (14%) and Victoria (8.7%).

AFG’s 2011 sales are recovering after “record lows” in January and February, though the $2.5bn in loans processed in March was still 9% down on the $2.7bn of sales a year earlier.

The March sales figure represented a 22% jump on February’s $2.05bn in mortgage sales, which is considered a traditionally quiet month for mortgages.

AFG GM of sales and operations Mark Hewitt said after two months of “extraordinarily subdued” markets, confidence was returning. NSW bucked the national trend, following a similar result in February, recording exactly the same figure for mortgage sales in March 2011 as the state did in March 2010. Queensland has seen a 15.4% year-on-year decrease in sales, followed

by Victoria, which is 11.7% down, and WA, which is 10.9% down. SA saw only a slight year-on-year decrease of 2.7%.

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People

Vow Financial brings in new faces Mortgage aggregator Vow Financial has brought on two new staffers to spur growth in the business, including its newly minted financial planning division Vow Wealth Management.

Justin Dale will head the new Vow Wealth Justin Dale division, which opened its doors for business through a JV with The Selector Group in May. Dale has past experience in third party distribution roles, having worked for Macquarie Bank, Citibank and Westpac.

Dale said he found the new role as head of the wealth business “exciting”. “In my previous role at Macquarie I successfully introduced the Macquarie Mortgage Guard product into the third party broking market, and at Citibank I was the NSW/ACT state manager for third party sales. In these roles I got to know many of the Vow brokers, and I am now looking forward to working with them to expand their offerings into financial planning,” he said.

Meanwhile, Leighton King has joined the Vow Financial business as a business development manager, following

Resimac appoints NSW BDM

previous roles at Aussie, South Western Financial Services, GE Finance and Westpac.

Vow hopes his leadership and communication skills will ensure success.

“As a manager who’s passionate about business growth and commitment to service excellence, I’m really looking forward to embracing the challenge of being an integral part of the team that is determined to increase Vow’s market share,” Leighton King King said.

Non-bank lender Resimac has appointed Kathryn Whiney as a senior business development manager for its New South Wales business.

Whiney joins the lender from Mortgage House, where she worked across both the wholesale and retail businesses.

Commenting on the appointment, Resimac national sales manager David Coleman said Resimac’s recruitment of Whiney would bolster the NSW business development team, as a result of the “valuable experience” that she brings from Mortgage House into the Resimac role.

Caught on camera St.George invited 65 of its top brokers to the prestigious Lakes Golf Club in April for an 18-hole showdown. Although Steven Heavey’s team managed to out-putt the other broking teams, all enjoyed the networking occasion

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6 1 In second place: Craig Russell, John Montgomery, Romney Ferguson (St.George) and Nunz Lusano 2 The winners: Peter Wotherspoon, Steven Heavey (St. George), Peter Doust (St.George Illawarra Football Club) and Brad Nolan 3 Mark Lyons, Wendell Sailor, David Brell, Cameron Wiles 4 Steph Kay and Belinda Saade (St.George) with Wendell Sailor 5 3rd place team : David Newham, Alan Hemmings (St. George RM), Will Foster, Grant Roden 6 Murray Dickson, Darren Little (St.George), Jo FitzroyKelly (Genworth) and Lindon Reed 7 Winner of both ‘Nearest to Pin’ and ‘Longest Drive’: Scott Anderson with Wendell Sailor 8 Highest bidder at a silent auction, Tony Pearce, with Wendell Sailor and Steven Heavey (St.George). The auction raised $1,500 for the St.George Foundation

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Resimac invited Australian Broker and a group of broker partners to ANZ Stadium to watch a riveting St.George and South Sydney clash. Brokers were ecstatic when the Dragons trounced the Rabbitohs in the final half 1

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Vow Financial invited its top 15 brokers to a Pinnacle CEO Club event at the Q Station retreat in Manly, NSW. With a number of business sessions followed by a dinner, the day gave Vow’s top performers an inside track into the strategy of the business

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RESIMAC (Top) 1 St. George dominate the second half 2 Ben Abbott (Australian Broker) with Jim Moulton (Resimac) 3 Robert Glasscott (RG Financial Services), Karma Atcheson (Resimac) and Gregg Murray (Smartline) 4 Gary and Pam Hogarth (ALCO) VOW (Bottom) 5 David Ewens (Bankwest), Rob Diodato, Milan Chetkovich 6 Ian Rakhit (Head of Specialist Banking, Bankwest) 7 Matt Mitchener (Vow Financial), Peter Bull, Jerry Gibb 8 Michael Osborne (Vow Financial), Greg Sterland, John McLennan 9 Tim Brown (Vow Financial), John Doolan, Rodny Ghalie 10 David Ewens (Bankwest), Tara Davoren (Vow Financial), Milan Chetkovich 11 Vow Brokers attending the Pinnacle CEO Club

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Insider

Cleanup on aisle three

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nsider hates few things more than grocery shopping. No matter what time you choose to do your supermarket run, it seems the store is always crammed full of people, few of whom have mastered the rudimentary skill of guiding a shopping trolley through an aisle without ramming it into the back of your ankles or parking it directly in front of the one item you’re after.

What, then, could alleviate the stress of the weekly grocery run?

Why, perhaps the opportunity to also take out a 30-year mortgage in between picking up your Weet-Bix and Tim Tams. That’s what British supermarket giant Tesco is banking

Return to sender…

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ow, Insider knows that brokers have a great love (at times) of the major banks, and especially their most senior executives, despite the regular gripes and grumbles

Got any juicy gossip, or a funny story that you’d like to share with Insider?

Drop us a line at insider@ausbroker.com

Could home brand mortgages reduce shopping bills?

on. The retailer recently announced it will be opening a bank and offering home loan services. New Tesco CEO Phillip Clarke proudly trumpeted the move, saying Tesco has “the opportunity to be the sort of bank we all used to love”. Now, Insider may be forgetting something here, but he doesn’t seem to harbour any fond memories of banks that include throwing a couple of cans of baked beans and a bag of Doritos in with his home loan. Hmmm. Could those be capitalised onto the loan?

At any rate, he’s already imagining the following exchange becoming common in British households: Wife: Did you remember the nappies?

Husband: Yes Wife: Did you remember to take out a $450,000 mortgage at 6.5% interest for 25 years?

Husband: I knew I forgot something! made about the Big Four. After all, market share talks, right? But somehow, Insider does not think that the love is such that it needs to involve regular correspondence with bank CEOs. Insider has been made aware of one major bank

chief executive, who has at times invited these snail mail overtures from the broking fraternity, should they ever have an issue or concern that needs addressing.

However, perhaps said chief executive underestimated the willingness and persistence of some among those eager broking audiences, who have subsequently relentlessly written letter after letter to this particular CEO. In fact, despite the efforts of aggregators and other senior managers to step in between to handle these concerns – freeing up the CEO to do that important job of running one of Australia’s biggest financial institutions – some brokers have continued to litter this CEO’s desk with letters on the finer points of their deals. Insider suggests that if brokers ever have the urge to pen a letter, perhaps it should be to those better placed – and more interested – in dealing with it.

The Bibby Bunny

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aster just wouldn’t be the same without chocolate eggs, hot cross buns… and the Easter Bibby. Easter Bibby?

Doesn’t Insider mean the Easter Bunny? No, actually – Insider is talking about Bibby Financial Services, who really made his Easter this year with a series of seasonal tips that made him forget all about furry bunnies.

The 10-point checklist, from Bibby’s managing director Greg Charlwood, contained such sweets as ‘Chase the bigger bunny’, ‘Try a different flavour’ and ‘Get your eggs in order’. Reading the list point by point, one could almost envision Bibby management had thought of this idea in the midst of their own gleeful Easter egg hunt, possibly financed at the last minute by some quick cash-flow finance. Of course, the list was not wholly focused on Easter revelry, but instead offered some very pertinent business tips. There was one particular tip – ‘Give

your staff a chocolate’ – which is Insider’s personal favourite.

‘Don’t put all your eggs in one basket…’

You can’t keep a bad man down

As licensing and regulation have come into effect, ASIC has begun its duty of tossing out some lifetime bans to dodgy brokers. Now, Insider would like to think the readership of his august publication is made up of the industry’s best operators, but just in case you’re one of the brokers who’s felt ASIC’s wrath, he’s got an interesting story to buoy your spirits. A 61-year-old mortgage broker in Scotland was recently handed a lifetime ban for submitting fraudulent mortgage applications, and responded by doing something UK regulators probably never banked on: ignoring it. Exhibiting the kind of plucky, can-do attitude one has to admire, the broker has just gone on operating, perhaps playing off his dangerous maverick status to market himself to clients who like to live on the edge. In addition to being banned for life, the broker is also the subject of a police investigation. If he ends up going to jail, Insider predicts he’ll still keep writing loans. It would be the ultimate triumph for the unethical broker. He’s already banned and in jail. What else could they possibly do to him?

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Services

Receive breaking news updates direct to your inbox. Sign-up for the FREE e-newsletter at www.brokernews.com.au Aggregator/Wholesale Broker Ballast Finance 1300 270 942 www.ballast.com.au Page 9 Mortgage House 133 144 www.mortgagehouse.com.au save@mortgagehouse.com.au Pages 18 & 19 PLAN Australia 1300 78 78 14 www.planaustralia.com.au Page 5 Business strategist consultancy BM2 www.bm2.com.au email: enquiries@bm2.com.au telephone: 02 8875 7789 Page 10 Choice aggregation 1300 135 389 www.choiceaggregationservices.com.au Page 13 LoanKit 1800 466 085 www.loankit.com.au Page 12 COMMERCIAL Acuity Funding 02 9484 0609 www.acuityfunding.com Page 6

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Banksia Financial Group 1800 333 114 www.banksiagroup.com.au Page 7

NCF Financial Services Pty Ltd 1300 550 707 www.ncf1.com.au Page 8

LENDER Liberty Financial 13 23 88 www.liberty.com.au Page 3

Quantum Credit 08 9325 6255 www.quantumcredit.com.au Page 17 OTHER SERVICES Mortgage & Finance Association of Australia (MFAA) 1300 554 817 www.mfaa.com.au Page15

MKM Capital 1300 762 151 www.mkmcapital.com.au Page 2 Provident Capital 1800 668 008 www.providentcapital.com.au Page 4 NON BANK LENDER Mortgage Ezy 1800 TOO EZY (866 399) www.mezy.com.au ezyquit@mezy.com.au Page 32 SHORT TERM LENDER Interim Finance 02 9982 2222 www.interimfinance.com.au Page 34 Mango Media 02 9555 7073 www.mangomedia.com.au Page 1

Trailerhomes 0417 392 132 Page 27

www.residex.com.au The House Price Information People

Residex 1300 139 775 www.residex.com.au Page 35 RP Data 1300 734 318 www.rpdata.com Page 23 WHOLESALE Resimac 1300 764 447 www.resimac.com.au Page 36

To advertise in Australian Broker call Simon Kerslake on +61 2 8437 4786