Australian Broker 17.13

JULY 2020 ISSUE 17.13

Electronic mortgages here to stay Calls for the temporary measures introduced due to COVID-19 to remain permanently /06

Diversifying into SMSF With the SMSF sector displaying reliance in the face of the pandemic, big opportunities exist /18

OPEN BANKING Consumers will benefi t from signifi cant savings and greater transparency with phase one of open banking, says the ABA’s Anna Bligh /16

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Making a diff erence The La Trobe Financial Foundation has followed a substantial bushfi re relief donation with $1m to fi ght COVID-19 /20

ALSO IN THIS ISSUE… Big issues for all borrowers Jason Fallscheer says this is no time to be complacent about educating borrowers /23 ‘Wagyu and Shiraz’ appeal ASIC’s responsible lending appeal dismissed – and brokers react /24 In the hot seat Kirsty Dunphey shares her “steep learning curve” into mortgage broking /30

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NEWS

IN THIS SECTION

Lenders ASIC sues major bank over confl icted remuneration /04

Industry groups Electronic mortgages should be here to stay /06

Market HIA welcomes refi nements to HomeBuilder scheme /10

Aggregators Finance brokers remain steadfast and hopeful /12

Technology Loan Market unveils two new tech tools /08

www.brokernews.com.au JULY 2O20 EDITORIAL

SALES & MARKETING

Editor Sarah Megginson

Publisher/Sales Manager Simon Kerslake

News Editor Madison Utley Production Editor Roslyn Meredith

GLOBAL WATCH How is the mortgage and broking world responding to the COVID-19 pandemic overseas?

Here’s your snapshot of the news that matters most to the mortgage industry in North America

PROPERTY INVESTORS FLEE METRO WELL BEFORE COVID-19 real estate talking heads discuss whether or not investment opportunities will emerge now that COVID-19 has made living and working shoulder-to-shoulder with thousands of other people less attractive, new data from LightBox highlights a trend that was playing out well before the pandemic. In its most recent Market Snapshot, LightBox revealed that over the past eight quarters investors in North America have been migrating away from primary metropolitan areas to secondary and tertiary markets that provide greater upside and less-competitive buying environments. “Everybody wanted deals in New York and L.A. and the really big metros in the U.S., but over time, all of that interest in properties in the bigger metros drove prices up,” said LightBox’s principal analyst, Dianne Crocker. Now, cities like Baltimore, Providence and Portland are seeing faster growth.

WHILE

ART & PRODUCTION

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RAPID RISE IN FIRST HOME BUYERS ENTERING US MARKET home buyers in the United States’ competitive, inventory-challenged FIRST-TIME housing market appear to be benefiting from the pandemic. New data from Genworth Mortgage Insurance has found that first-time homebuyer activity was not only strong in the first quarter of 2020, it also bounced back impressively in May after falling off a cliff in April. Q1 2020 saw first-time homebuyers purchase 456,000 single-family homes, an increase of 14% on the same period in 2019.

The total number of first-timers hit a seasonally adjusted annual rate of 2.24 million in the first quarter, meaning they are entering the market with a rapidity not seen since 2006. They accounted for 40% of single-family buyers in Q1. First-time homebuyer activity also rebounded rapidly in May, when it experienced a 27% increase in activity.

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HOMES MORE AFFORDABLE FOR AVERAGE WAGE EARNERS affordability for average wage earners in the US has increased in the second quarter of 2020, according to figures from ATTOM Data Solutions. Its 2020 US Home Affordability Report revealed that median prices of single-family homes and condos in the second quarter of 2020 are more affordable than historical averages in 49% of US counties with enough data to analyse – up from 31% a year ago. The report determined affordability for average wage earners by calculating the amount of income needed to make monthly house payments – including mortgage, property taxes and insurance – on a median-priced home, assuming a 3% down payment and a 28% maximum “front-end” debt-to-income ratio. Compared to the second quarter of 2019, 200 of the 406 counties that ATTOM analysed are now more affordable, up from 126.

HOUSING

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NEWS

LENDERS FREEDOM LEND BOASTS LOWEST VARIABLE RATE

CASE OF CONFLICTED REMUNERATION: THE NUMBERS

Australia’s official cash rate having remained unchanged for some time, lenders have continued to slash their home loan rates, and a new leader has emerged in “the mortgage rate wars”. Online lender Freedom Lend is now offering the record-low variable rate of 2.17% to new customers with a deposit of 30% of more. According to ratecity.com.au, 15 lenders cut more than 50 variable home loan rates for new customers in June alone.

DESPITE

AUSWIDE RELEASES NEW HOME LOAN PRODUCT non-major bank has released a new product following the events of recent months, which have caused many Australians to “re-evaluate what matters”. Auswide Bank is offering a basic home loan devoid of “all the bells and whistles” of other products; the simple, easy-to-manage loan comes with no monthly or ongoing fees. Only owner-occupiers can access the “no fuss” loan, which offers a low variable interest rate and free online redraw.

A

“It was only a matter of time before interest rates started with a one! There’s some fierce competition on fixed rates, which is great for borrowers” Raj Ladher, Home loan specialist, YourMortgageBroker

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$1m

$22m

Maximum civil penalty for alleged contraventions by CBA and Colonial First State

Value of conflicted remuneration ASIC alleges CBA was paid

390,000

Number of super fund members impacted under the arrangements

ASIC SUES MAJOR BANK OVER CONFLICTED REMUNERATION The regulator has taken CBA to court over allegations of conflicted remuneration dating back to 2013 has sued Commonwealth Bank and its subsidiary, Colonial First State (CFSIL), in relation to alleged conflicted remuneration paid by CFSIL to CBA between 1 July 2013 and 30 June 2019.

According to ASIC deputy chair Daniel Crennan QC, the proceedings reflect the “ongoing commitment” by ASIC’s Office of Enforcement to bring the recent royal commission into misconduct in banking’s referrals and case studies to litigation “when appropriate”.

In this instance, ASIC alleges that more than $22m in conflicted remuneration was paid by CFSIL to CBA for the distribution of Essential Super, a superannuation product ASIC

issued by CFSIL. CBA distributed the Essential Super product using both its branch and digital channels. Approximately 390,000 individuals became members of the super fund under the arrangements.

ASIC alleges the arrangement breached the ban on conflicted remuneration as it could reasonably be expected to influence the choice of financial product recommended

by CBA to retail clients, or the financial product advice given by CBA to retail clients.

The regulator is therefore seeking civil penalties against both CBA and CFSIL, with each contravention attracting a maximum civil penalty of up to $1m for both CBA and CFSIL. The first hearing is yet to be listed by the court.

On its website, CBA has acknowledged the proceedings by

ASIC and says it will “provide any further update as required” after reviewing the regulator’s claim.

In June 2018, CBA announced plans to demerge its wealth management and mortgage broking businesses in totality some time in late 2019. The demerged business, called CFS Group, was to include CBA’s Colonial First State, Colonial First State Global Asset Management, Count Financial, Financial Wisdom and Aussie Home Loans businesses.

However, in March 2019, CBA announced the temporary suspension of the demerger but failed to provide an alternative timeline. The $4bn spin-off of its wealth management and mortgage broking businesses was put on hold indefinitely.

In a statement to the ASX, CBA said it was still committed to the demerger but needed to focus on addressing the royal commission’s recommendations first.

Colonial First State remains a wholly owned subsidiary of CBA to date.

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6/07/2020 12:57:11 PM

NEWS

INDUSTRY GROUPS

MFAA HOSTS FINAL 2020 STATE AWARDS EVENTS June, the MFAA’s first-ever two-week digital State Excellence Awards were held.

The association celebrated the best in the industry across the country, honouring standout brokers, BDMs, lenders and aggregators in each state and territory. “It was a privilege to recognise all the award finalists, and my congratulations go to those who emerged victorious,” said MFAA CEO Mike Felton. The MFAA’s national awards event is due to take place in August.

IN

ELECTRONIC MORTGAGE TRANSACTIONS SHOULD BE HERE TO STAY There are calls for the temporary COVID-19-related measures such as electronic mortgages, witnessing a document on a video call and e-signatures to be made permanent coalition of associations, including the Australian Banking Association, the Business Council of Australia, the Australian Institute of Company Directors, the Council of Small Business Organisations, the Financial Services Council, the Real Estate Institute of New South Wales and the Australian Property Institute, is writing to each member of the National Cabinet to request that some of the industry’s COVID-related changes are made permanent.

For the benefit of consumers, the coalition proposes that permanent changes should include allowing deeds to be created and signed electronically; accepting electronic signatures rather than paper signatures for a broader range of legal and business documents, including guarantees, statutory declarations A

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and trust deeds; allowing the witnessing of documents to happen via audio-visual means with the use of electronic signatures; and processing mortgages digitally.

Australian Banking Association CEO Anna Bligh said the nation’s consumers would be the big winners from making these changes permanent.

“The onset of COVID-19 has meant fast-tracking moves right across the economy to a paperless, contactless digital way of conducting business,” Bligh said.

“We’re calling on both federal and state governments to make these changes permanent in order to keep the ease, keep the lower cost and reduce the hassle of transactions that rely on wet signatures and paper documents.

Federal and state governments

are to be congratulated for moving swiftly during COVID-19 to use their emergency powers to facilitate these e-transactions; it’s now time to make these changes permanent to … reduce the hassle of transactions that rely on ‘in person’ signatures and paper documents.”

CEO of the Business Council of Australia Jennifer Westacott said that in order to manage this crisis, “governments acted quickly to suspend outdated, unnecessary and job-killing red tape that was making it harder to do business”.

“As we recover we should all ask ourselves at every step of the way, will bringing back these regulations help keep costs down for consumers or help make Australia an easier place to do business and create new jobs?” she said.

CEO of the Australian Institute of Company Directors Angus Armour added, “Many regulations governing business transactions are outdated. This is the opportunity to push our governance and business rules into the 21st century with more digital-friendly settings.”

CONNECTIVE WELCOMES ACCC’S MERGER DECISION ACCC has revealed it will not oppose Australian Finance Group’s proposed acquisition of Connective after determining that “robust competition” would remain, even if the two groups were to merge.

Connective CEO Glenn Lees welcomed the decision. “The ACCC review has been comprehensive and rigorous, and its decision is a reflection of the ever-changing competitive landscape where new technology and regulation are driving fundamental change in the broking sector,” he said.

THE

“The onset of COVID-19 has meant fast-tracking moves right across the economy to a paperless, contactless digital way of conducting business” Anna Bligh CEO, Australian Banking Association

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6/07/2020 12:58:38 PM

NEWS

TECHNOLOGY

AUTOMATION THE BIG TECH TREND TO IMPACT BROKERS brokers are embracing the rapid adoption of digital technology triggered by COVID-19’s impact on the way business is done, and they believe automation and artificial intelligence will have the greatest impacts on the industry in 2021.

During PLAN Australia’s annual Digital Professional Development Day on 18 June, attendees were asked what tech trend would have the greatest impact on the broking industry in the next year: they said automation would have the most profound impact (34%), followed by artificial intelligence (24%) and virtual verification (23%).

MORTGAGE

LOAN MARKET UNVEILS TWO NEW TECH TOOLS FOR BROKERS Loan Market is offering its network two customer-facing tech tools that are designed to save brokers time and further protect them in a best interests duty environment at the start of June, Loan Market’s new automation tools, Goal Setter and Game Plan, are part of the group’s broader strategic response to compliance given the introduction of the best interests duty legislation and the regulatory landscape at large.

Goal Setter, which is integrated into Loan Market’s technology platform MyCRM, is a digital meeting companion that drives conversations around client goals, preferences and requirements. The conversations can take place either face-to-face or via a video call.

According to Loan Market chief customer experience officer Jason Furnell, the application helps brokers ask customers the right kinds of questions, LAUNCHED

FINTECHS SEE STARK DROP IN MEDIA EXPOSURE of Australia’s leading neobanks and fintechs have seen a significant drop in media exposure following a prolonged period of profile growth. A study of major metropolitan newspapers and news websites between June 2019 and May 2020 by Streem found that media usage of the term ‘neobank’ fell 74% from its peak earlier this year. Prospa’s media presence was the “notable exception” following its participation in the government’s Coronavirus SME Guarantee Scheme. However, after this bump, the fintech’s media mentions fell by 97% in May. SOME

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automatically capturing their responses in MyCRM. “Our goal is to abolish doublehandling for our brokers and ultimately save them time so they can spend it helping more customers,” Furnell said.

“The Goal Setter streamlines the meeting experience and prompts the broker to ask appropriate questions of every customer, ensuring they have the information and guidance they need to safely conduct detailed research and make recommendations that are clearly in the best interest of the client.”

Meanwhile, Game Plan, which is automatically generated by MyCRM, is a tech-driven document that outlines the work the broker has already completed on behalf of the customer and

details their opinions and recommendations.

According to Furnell, it is the “key artefact” that will prove brokers have met their best interests duty and responsible lending obligations.

“The Game Plan is a ground-up redesign of old compliance documents with a focus on delivering clear recommendations under the BID legislation,” he explained. “[It] is founded on linking the client’s goals, objectives, preference and requirements to the broker’s recommendations and rationale, with detailed notes on why the recommended product was selected across a number of different criteria, including interest rates, product features, turnaround times, lender preferences, credit policy and borrowing capacity.”

In the weeks since they were launched, both new applications have been used by more than 54% of Loan Market brokers and reached over 1,000 clients – figures the group says are climbing every day.

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NEWS

MARKET AUCTION VOLUMES BEGIN TO RECOVER volumes have been put under pressure by COVID-19, with around half of those scheduled being withdrawn at peak impact of the pandemic. However, not only have volumes begun to increase across the combined capital cities, but the clearance rate is creeping up as well. In the third week of June, 1,262 homes were scheduled for auction, returning a preliminary clearance rate of 66.1%, as compared to 1,181 auctions and a 59.3% clearance rate the week before. Notably, the preliminary clearance rates of Melbourne and Sydney were above the mid-60% mark.

AUCTION

‘THERE’S NEVER BEEN A BETTER TIME’ TO SELL executive chairman Sam White and Ray White Group managing director Dan White have highlighted the “deep resilience” of the Australian property market, explaining why now is the time to consider selling. “People looking to sell need to know that the real estate industry has been very active since restrictions started two to three months ago,” Dan White said.

“The competition for property is as strong as ever – and with demand very much outstripping supply right now, there’s never been a better time to list your property.”

LOAN MARKET

HIA WELCOMES REFINEMENTS TO HOMEBUILDER SCHEME The Housing Industry Association says the ‘crucial final touches’ to HomeBuilder will create greater certainty for homebuyers and boost further interest in the grant government has made modifications to its HomeBuilder Scheme that have been welcomed by the Housing Industry Association.

In mid-June, three key refinements were put forward to further shape the initiative: THE

• Homebuyers will be allowed the necessary time to arrange finance and building approvals and meet other legal requirements before work is required to commence, rather than the project having to start within the fixed three-month time frame first announced.

• It was clarified that a sales contract for a home purchased

off the plan would have the same eligibility for the scheme as a building contract.

• The process was aligned with the current timing of payments of First Home Owner Grants for new homes.

“The HomeBuilder grant has already boosted interest in buying a new home or carrying out a renovation project. The new details will make this interest even stronger,” said Kristin Brookfield, HIA chief executive of industry policy.

“These updates will give greater certainty to homebuyers and their builders about what projects potentially qualify for the grant.”

While the HIA still sees a need for state and territory revenue offices to outline the final details of how applicants will apply for the grant, as well as the timing of its payment, the new information addressed a number of concerns the group had expressed to government.

“Recognising that a fixed threemonth time frame to commence building work did not reflect how dependent home builders are on other players, like the banks, the councils and building certifiers, is extremely important and a welcome update,” said Brookfield.

“HIA has been working closely with state and territory revenue offices, and we look forward to receiving these details soon, which will assist homebuyers and builders begin taking full advantage of the grant.

“Builders are feeling positive about the next six months of activity, and equally important is the potential the scheme has to generate activity in 2021.”

“These updates [to HomeBuilder] will give greater certainty to homebuyers and their builders about what projects potentially qualify” Kristin Brookfield Chief executive of industry policy, Housing Industry Association

CRITERIA FOR HOMEBUILDER GRANTS Source: Australia Government

$688m

Total value of the HomeBuilder program

$200,000

Maximum joint annual income of a couple applying for the grant

10

$25,000

Amount that owner-occupiers can receive towards the cost of building or renovating their property

$150,000

Minimum value of renovations in order to qualify

$125,000

Maximum annual income of a single applicant for the grant

$750,000

Maximum value of renovations in order to qualify

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13/02/2020 10:31:15 PM 6/07/2020 1:01:15 PM

NEWS

A G G R E G AT O R S

FINSURE RAMPS UP SUPPORT FOR COMMERCIAL aggregator has invested in its national program to support brokers looking to diversify into commercial loans, given that lenders have been making it more difficult to get a deal through. The efforts are headed by Finsure national commercial manager Jas Fazlic and include “intensive” BDM training for brokers. “We have seen an uptick in brokers wanting to diversify from residential loans, but commercial lenders have been tightening credit criteria,” said Fazlic.

AN

MORTGAGE CHOICE: 3-YEAR HIGH IN CUSTOMER ACTIVITY aggregator that has reported a three-year high in monthly lead results has attributed the strong customer activity to its approach to addressing COVID-19. “When the ... pandemic began to unfold, our customer communications team quickly rolled out a strategic communications plan targeting our database,” said Susan Mitchell, CEO of Mortgage Choice.

“In times of crisis, consumers look to experts they know and trust, and [seek] clear, consistent and timely communication from our brokers.”

AN

“Finance and mortgage brokers are proving themselves to be the lifeblood of the Australian small business community” Brendan Wright CEO, FAST

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FINANCE BROKERS REMAIN STEADFAST AND HOPEFUL More than three quarters of FAST’s finance brokers report that they have been negatively impacted by the pandemic, according to a survey by the aggregator 76% of finance brokers in the FAST network report that COVID-19 has negatively impacted their business, sentiment remains strong: well over half (63%) of those surveyed indicated that they were optimistic about the future.

The latest FAST Business Lending Index included a survey of its broker network over April and May to give shape to how COVID had impacted both business and sentiment. The results revealed widespread anxiety and concern, tempered by a silver lining.

While the majority of brokers (69%) expect COVID to continue impacting business conditions negatively into the future, the report also showed that FAST brokers expect SMEs’ working capital flows to increase 20% over WHILE

the next six months as they assist them in securing funding lines.

“Finance and mortgage brokers are proving themselves to be the lifeblood of the Australian small business community and have been providing an essential service to them during these extraordinary times,” said FAST CEO Brendan Wright.

“Accessing finance will be critical for SMEs over the coming months, and our brokers are now preparing to help their commercial clients secure working capital so they can continue operating through this challenging period.”

Notably, the index showed that Australia’s financial sector experienced a strong increase in business lending over the first three months of 2020.

Drawing from data across 24

lenders, business lending for the three months to 31 March was up 13.4% on last year and up 30.4% from the December quarter.

“The impact of the COVID-19 virus and social distancing rules to minimise its contagion has been significant for Australian businesses. Many businesses are doing it tough,” Wright explained.

“However, businesses in certain sectors have been thriving. A sharp increase in the demand for asset finance suggests some businesses are growing, despite widespread reports to the contrary.”

Wright foresees brokers playing an important role in rebuilding Australia’s business community, saying they have “the chance to make a real difference to businesses and the lives of the people operating them”.

“This crisis will not last forever.

We will move through it and brokers will be there to stand by their customers. In these extraordinary times, human interaction with a trusted adviser is what clients need more than anything.”

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23/03/2020 9:24 AM 6/07/2020 1:02:17 PM

FE AT URES

BUSINESS VIE W

SMSF LENDING: RESILIENCE AND OPPORTUNITY COVID-19 has impacted demand for housing finance across the board, including SMSF lending. However, Cory Bannister, chief lending officer at La Trobe Financial, explains how SMSF loans have shown great resilience throughout the pandemic – and hold promise for brokers who are keen to diversify in the future

SMSF STATS

599,678 Number of SMSFs in Australia

1.1m+ Number of members these SMSFs represent

35% Share of SMSF property assets that are residential

65% Share of SMSF property assets that are commercial Source: La Trobe Financial, June 2019

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proportion of SMSF lending-based property assets has increased over the last decade, growing from under 5% in 2012 to over 20% of total assets today.

But while all sectors of the mortgage and finance market have been impacted by what Cory Bannister, chief lending officer at La Trobe Financial, describes as the GVC, SMSF lending has shown its resilience.

“Without doubt, the biggest impact on the SMSF lending space has been the outbreak of COVID-19, which has been labelled the ‘global virus crisis’, or GVC. We expect the ripple effects from the GVC to be felt well into the year ahead, which will produce a heightened sense of caution amongst property investors generally,” Bannister says.

“The pandemic has impacted demand for housing finance generally, and SMSF lending demand is not immune from this impact.

However, in terms of product performance, our experience is that SMSF loans have shown a greater resilience to the impact of COVID-19, which is no surprise given the steady and reliable performance of the product over time, thanks to the product’s unique mechanics.”

Bannister points to some of the risk mitigation factors, such as the fact that SMSFs often hold a substantial portion of their assets in cash, as being key to this sector’s resilience in trying times.

“This effectively provides a liquidity buffer for when asset returns – rental income, in the case of property – are delayed or outstanding for a short period,” he explains.

“For PAYG members, contributions THE

to the SMSF are regular and consistent, providing there is no disruption to their employment situation. This provides the fund with an increasing level of available assets, subject to the performance of the fund, to be used where required to meet fund liabilities.”

Unlike standard loans, the discretionary expenditure of the SMSF members also has no impact on the borrower’s ability to meet loan repayments, as the assets cannot be

property will remain an attractive proposition for SMSFs, particularly for self-employed individuals looking to acquire a site from which to operate their business.

“For investors looking to add commercial property to their SMSF portfolio, we believe there will continue to be considerable opportunity for potential investments. However, there is an elevated level of risk to this strategy, and we would encourage any

“Brokers should consider offering SMSF loan products as part of their overall diversification strategy … Unless brokers cater for their clients’ full finance needs, there is an increasing risk that clients will look elsewhere for a one-stop shop” drawn upon unless they are in the pension phase – which also mitigates the risk of repayment default, Bannister adds.

Moving forward, he suggests that brokers who are interested in diversifying into the SMSF lending space could forge a solid path forward as we progress into the second half of 2020.

Historically, commercial lending through SMSFs has been where the biggest opportunity has existed for brokers, as it’s represented a much greater share of portfolios than residential. Bannister says commercial

investor to seek professional advice, particularly during this time of uncertainty and volatility,” he says.

“Looking ahead, we anticipate strong demand for light industrial property as the e-commerce and data storage industries continue to grow.

Turning to residential assets, with work from home capability on the rise, we see potential for growing demand for urban-fringe property as buyers seek affordable family homes where they can work and live. These urbanfringe areas have historically been very popular amongst SMSF investors.”

For brokers who are yet to get

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In partnership with

for the clients,” he explains.

“We would recommend that clients have an SMSF in place already, unless they are coming to a broker with advice from an adviser and are in the process of establishing an SMSF. We do not recommend that clients be encouraged to establish an SMSF unless they receive independent advice from a financial adviser.”

One example of where it may be appropriate for a broker to recommend seeking advice about

“In terms of product performance, our experience is that SMSF loans have shown a greater resilience to the impact of COVID-19”

Cory Bannister, chief lending officer, La Trobe Financial

involved in commercial transactions, there are a number of considerations they should weigh up before moving forward. First and foremost is the fact that, within the current finance market for SMSF loans, brokers who have always relied on the banks for their lending needs will now have to think about looking at non-banks in the market to meet their clients’ needs, Bannister says.

“At La Trobe Financial we have one of Australia’s broadest product

ranges. For our SMSF loan product, we can lend up to an LVR of 80% for residential-type properties and up to 70% for commercial-type properties,” he says.

“Our product specifications and processes are simple for brokers to understand, and our credit team is very experienced in these types of loans. Our team is always available at the end of the telephone to assist finance brokers in the process.”

Those brokers who have an

appetite for introducing SMSF lending into their business may find value in reaching out to their referral partners, such as accountants and financial planners, to let them know they have diversified into this space, Bannister suggests.

“Not only can this help to establish a steady and sustainable supply of regular quality clients, but brokers can also work with these people to ascertain whether borrowing through an SMSF structure is appropriate

setting up an SMSF is when the client is self-employed and currently leasing their place of business.

“If they hold adequate funds in their superannuation fund, it can often make good commercial sense for them to purchase their business premises through an SMSF. Through this structure, they can use cash flows from their business to pay their mortgage, instead of paying someone else’s by way of rent. It is a discussion your client might wish to have with their financial adviser,” Bannister says.

“Broadly, brokers should consider offering SMSF loan products as part of their overall diversification strategy as it is a significant growth area that is likely to include a number of their current and future clients. Unless brokers cater for their clients’ full finance needs, there is an increasing risk that clients will look elsewhere for a one-stop shop.” AB www.brokernews.com.au

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NE WS ANALYSIS

A NEW ERA: LAUNCH OF OPEN BANKING PHASE ONE Under open banking, consumers are set to benefit from significant savings, thanks to greater transparency and the ability to secure better deals on financial products.

1 July marked the start of ‘phase one’, so what does that mean for borrowers?

1 July, Australia entered a new era with the launch of the first phase of open banking, which allows personal banking customers to share certain data with trusted third parties.

The Consumer Data Right regime, also known as open banking, is intended to give consumers and small businesses greater control over their personal information by allowing banks and fintechs to provide safe and secure access to their data to trusted third parties.

With this capability, Australians will be able to make better decisions regarding the products and services they purchase, and can switch between providers more easily.

The transition to the new system will challenge existing providers to better look after their customers and will create room for new competitors to enter the market.

The ACCC had earlier launched a platform that enables banks and fintechs to apply to become accredited data recipients in order to be able to fully engage in the ON

open banking environment.

“The launch of this Consumer Data Right (CDR) platform and portal means businesses of all sizes can take the first steps towards being part of this crucial economic reform,” said ACCC commissioner Sarah Court.

portal where businesses can apply to be accredited but is also crucial to ensuring that consumers’ data is shared exclusively and securely between parties that have been vetted by the ACCC. Although the CDR system was

“This sharing of data is a watershed moment for competition in the banking industry and, in time, will enable every Australian to use their data for their own benefit” Anna Bligh, CEO, Australian Banking Association “We are encouraging businesses wanting to participate in the CDR regime to apply for accreditation and take part in reshaping banking competition in Australia.”

The platform, launched at the end of May, not only provides a

introduced on 1 July, Anna Bligh, CEO of the Australian Banking Association, said it would start small but ramp up over time.

By the end of 2020, the ACCC anticipates that there will be dozens of companies accredited to help

WHAT IS THE CONSUMER DATA RIGHT (CDR)?

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

The CDR gives consumers greater control over their own data, including the ability to securely share data with a trusted third party.



It aims to help consumers monitor their finances, utilities and other services, and compare and switch between different offerings more easily.



The system also aims to encourage innovation and competition between service providers, helping consumers access products and services.

customers get a better deal – and the more accredited companies there are, the greater the competition battling it out for Australian customers who are searching for the best deal, Bligh said.

“This sharing of data is a watershed moment for competition in the banking industry and, in time, will enable every Australian to use their data for their own benefit,” Bligh said.

“Customers can be assured that they will always be in control of how and when they share their data. This is a great achievement by the major banks. Despite moving the majority of their workforce to work from home and processing unprecedented numbers of customer queries and loan deferrals as a result of COVID-19, the banks have stayed on plan and delivered open banking and ensured the data will start to be shared from today.”

Sydney-based purpose-fintech Frollo is one of only two companies that have so far been approved to access the data from the new CDR system as it goes live. With first access, Frollo is in a position to help traditional banks, neobanks, fintechs, lenders and employers get ahead of the competition with its B2B and open banking solutions.

The financial management company, which currently has over 100,000 users on its financial wellbeing and budgeting app for consumers, is the only fintech that’s an accredited data recipient (ADR) under CDR rules after it participated in the open banking trial and helped build and test the infrastructure alongside the big four banks.

Gareth Gumbley, CEO and founder of Frollo, said that after

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Anna Bligh, CEO, Australian Banking Association

Angus Sullivan, group executive of retail banking services, CBA

Sarah Court, commissioner, ACCC

Gareth Gumbley, CEO and founder, Frollo

investing in getting accredited, the next step for organisations would be pulling the data and understanding how they could compete with it.

“Now that the Consumer Data Right is live, the next step for everybody is how to leverage the data for a competitive advantage.

Given our experience of testing alongside the banks, we’re in a

position to educate and guide other businesses looking to comply, compete, innovate and leverage the opportunities available under the system,” said Gumbley.

“Once these organisations become new ADRs, we’re also in a unique position to help them actually collect the CDR data through our SaaS technology solutions. We’re currently

WHO CAN SHARE DATA THROUGH OPEN BANKING?

To be eligible to share data, a bank customer must be:

  

at least 18 years of age registered for online personal banking registered for SMS Protect

one of the only organisations to have technology built specifically for open banking in Australia, which makes it incredibly valuable for new ADRs who don’t have the resources to invest in their own solutions.”

Gumbley added that open banking had triggered a massive shift in the way organisations think about consumer data, which would benefit Australians.

“The Consumer Data Right system gives organisations the ability to be faster, more transparent and more secure. We’re moving into a world where we can give users a real-time view of their money and will soon be able to confidently move them to the best products available with a couple of clicks,” Gumbley said.

The four major banks have confirmed their commitment to the initiative, with Westpac announcing that eligible customers of the bank are now able to share their credit

and debit card data, as well as deposit and transaction account data, with accredited third parties.

Westpac acting chief executive, consumer, Richard Burton said Westpac was proud to be able to switch on open banking for customers.

“This marks an important milestone for open banking, with customers now having the ability to share their data. Westpac supports enhanced data sharing in banking as it will help drive competition and customer choice,” Burton said.

“We have been working hard throughout the entire process to ensure the system is robust and secure for customers. Enhanced data sharing will give customers more confidence they are getting the best deal, and help make it easier to find the best-value service that meets their needs.”

Lenders and banks have invested significant resources in getting open banking ready. Rachel Slade, group executive, personal banking at NAB, confirmed the bank had “invested heavily in our technology foundations and in our people” to build a customer experience that focuses on ensuring the safety and security of customer information.

“A competitive and innovative financial services industry is critical to ensuring great customer outcomes and the growth of the economy more broadly, with opportunities for further innovation and new business models to be established,” Slade said.

“It will take time for customers to develop familiarity, trust and understanding in using open banking. We’re continuing to prepare for future phases that will allow our customers to share more of their data, should they choose to do so, and we will continue to invest in the open banking regime as future phases are developed, while ensuring that speed is not prioritised over safety. This is critical to building confidence in the system.”

Angus Sullivan, CBA’s group executive of retail banking services, added that with cyber security becoming a growing, significant issue, the constant threat of online fraud underpins the need for consumers, organisations and government to take data and account security seriously. CBA is “continuing to invest more than $5bn in technology in the next five years” to fight this battle, he added.

While just the four major banks will be part of the system initially, other banks are scheduled to join within the next 12 months. AB www.brokernews.com.au

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BUSINESS PROFILE

DIVERSIFYING INTO SMSF LRBAS Working closely with industry-accredited brokers, Thinktank offers self-managed super fund borrowers simple, quick and flexible lending options. Through SMSF lending, brokers who are keen to diversify their offering can find opportunities to work with SMEs to help them achieve their wealth management goals

popularity of SMSFs has grown substantially over the past 20 years, since the ATO began regulating them in 1999. While there has been strong growth in the number of SMSFs and their members, it is their total value of assets that is most impressive, says Per Amundsen, head of research at Thinktank: total assets of SMSFs now reach nearly $750bn, representing the largest portion of total superannuation savings at 27%, just in front of both industry funds and retail funds.

Although growth has levelled out over the past few years, the investment total remains a very significant figure. A key area of interest is limited recourse borrowing arrangements (LRBAs), which make up around 6% of total assets – and with the SMSF sector displaying reliance in the face of the pandemic, this is where opportunities lie.

“Like many in the industry, we expected COVID-19 would result in new applications falling as a result of both investors and owner-occupiers taking some time out from the market to reassess conditions as well as their own circumstances,” explains Amundsen.

“It has been heartening, therefore, that our pipeline of SMSF LRBAs has kept pace with the rest of our portfolio and is in fact up slightly in actual volumes and as a percentage of overall business. One of the key reasons for this is that our business and other similar lenders have experienced lower levels of hardship requests than we might have originally anticipated.”

Digging deeper into the hardship THE

18

experience, Amundsen says Thinktank is experiencing a lower number of requests for payment deferrals on SMSF loans than across the rest of their portfolio.

There also appears to be a high

or related parties in business real property.

“Many are also telling us they only need the three months of relief we originally provided and have recommenced making scheduled

“There is a real opportunity for brokers to make a specialty out of this type of borrowing, and there is enough diversity in SMSF finance to cover most types of residential and commercial property” level of confidence in recovery among SMSF trustees, due to the expectation that, as restrictions ease, their tenants will be able to recommence rental payments, whether they are third parties

loan payments,” Amundsen adds.

“A slower recovery is expected where premises such as restaurants are involved and some time will be needed to return to previous levels of trading. A small number

of our clients have unfortunately lost their tenants, and we will be offering additional support to those who need to find new ones as circumstances require.”

This flexible and proactive approach to managing individual situations on an as-needed basis, rather than taking a single and unmoving policy across the board, is one of the reasons why Amundsen expects SMSF LRBA lending to emerge “in very sound shape” from the COVID-19 pandemic.

“This may seem surprising to some, but it reflects the longterm investment approach that SMSF trustees have taken when embarking on geared real property investments within their selfmanaged superannuation trusts.

In fact, those who have criticised these strategies in the past may think again in light of the overall performance record once we emerge from the crisis.”

While the COVID-19 crisis has highlighted the overall strength and

THINKTANK AT A GLANCE

 Since 2006, Thinktank has worked from the ground up to become Australia’s leading specialist commercial property lender

 Surpassing $2.5bn in finance settlements, Thinktank provides loans ranging from $100,000 to $3m

 Flexible, tailored loan solutions come with no red tape or bank jargon, along with fast approvals and settlement

 With no annual reviews or ongoing fees, Thinktank offers ‘set and forget’ loan terms and competitive interest rates

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In partnership with

Per Amundsen, head of research, Thinktank

stability of SMSF as an investment strategy, Amundsen clarifies that its recent resilience reflects its longterm growth and value proposition.

“As mentioned previously, our own experience has seen Thinktank maintain very good levels of demand, and it has been one of the growth areas of the business during 2020. Although not as strong, this trend also appears to be reflected industrywide from ATO data available, although these are estimates only as the ATO has not been in a position to release

its usual quarterly statistics since September last year. What it has shown is that the very rapid growth experienced for some years since the start of SMSFs has now tuned into more steady long-term growth with the introduction of LRBAs,” he says.

“We expect this trend to continue, particularly as the sector emerges quite favourably from the COVID experience, which will further enhance investor and regulator sentiment. It certainly is our impression that there is a greater interest and awareness of SMSFs

and the capacity to invest in real property on a geared basis. Given this is the only superannuation vehicle in which you can invest directly in real property – geared or otherwise – it’s likely that the volatility of other investments during 2020 will see people reconsidering their superannuation investment choices, resulting in further growth for both SMSFs and LRBAs.” For mortgage brokers who wish to diversify and offer their clients better options in this space,

Amundsen says there are “a whole range of options for brokers within SMSF LRBAs, just as there are for lenders within the sector”.

“For some, a straightforward geared investment in a residential property is as much as they are interested in becoming involved in. As a broker, it’s important that you are aware of all the regulations imposed on this type of borrowing, and you will need to become specifically accredited,” he advises.

“At Thinktank, we are experts in SMSF LRBAs and can help brokers with their accreditation as well as gain a detailed understanding of the parameters and nuances involved with this type of lending. The more you know about your product, the greater value and result you can offer the borrower.”

For example, with commercial ‘business real property’ SMSF trustees can purchase their own business premises and can also make ‘in specie’ contributions to their SMSF as part of such a transaction.

“Understanding and knowing that these types of structures exist can greatly enhance your marketability and appeal to not only direct borrowers but also financial advisers looking for a broker to assist with arranging SMSF finance for their clients,” Amundsen says.

“There is a real opportunity for brokers to make a specialty out of this type of borrowing, and there is enough diversity in SMSF finance to cover most types of residential and commercial property. Yes, the skills employed in delivering outcomes to borrowers in a situation like we listed above is built on experience, but this shouldn’t be a barrier to getting started.”

Having built extensive experience and expertise in this field over a number of years, Amundsen adds that SMSF lending is “the type of work that builds on itself ”, offering brokers the opportunity to gain a reputation as an active and sought-after participant.

“At Thinktank, we run a variety of workshops and one-on-one sessions to help brokers quickly get up to speed with all the regulations and legislation involved in SMSF lending,” he says.

“There is also a tremendous amount of material available through numerous SMSF industry websites and the likes of law firms that service the sector.” AB www.brokernews.com.au

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GIVING BACK

LA TROBE FINANCIAL: MAKING A DIFFERENCE Doubling down on its philosophy of ‘others before self’, the La Trobe Financial Foundation has followed up a substantial donation to bushfire relief with a $1m hospital donation to fight the COVID-19 pandemic – and that’s not the end of its giving Australian diversified wealth manager with $11bn worth of assets under management, La Trobe Financial has been providing funding and investment solutions to Australian customers since 1952.

However, the lender is also very active in the philanthropic space through the La Trobe Financial Foundation, which delivers grants and initiatives to support organisations that are dedicated to improving the economic and social conditions of communities in need.

Since 1978, the foundation has donated over $21m to various causes, but recently, La Trobe Financial has ramped up its commitment to giving.

In the wake of COVID-19 arriving in Australia, the lender announced in June that it had donated $1m to AN

the Epworth Hospital for additional ICU equipment to cope with the anticipated influx of COVID-19 admissions during the pandemic.

“We were pleased to be able to assist the frontline ICU team at Epworth Hospital to manage the expected demand on their expertise.

We recently donated $1m during the bushfire crisis, and we have stepped up again during this new national emergency,” says La Trobe Financial president and CEO Greg O’Neill OAM. “This disease represents a unique situation for the global and local economy. Whilst the full human and economic impacts are still largely unknown and evolving, we are working with our industry partners and government to manage its effect on our customers and our staff. The

health, safety and wellbeing of our fellow Australians is of paramount importance to us.”

O’Neill says La Trobe Financial has worked extensively with the Epworth Hospital in the past and

is pleased to extend its support through this pandemic.

“Staying true to our philosophy of ‘others before self ’, we will do everything we can to help our customers and our potential

“When the chips are down, Australians have a proud record of standing behind and supporting each other. We should all be going out of our way to assist these frontline workers” Greg O’Neill, president and CEO, La Trobe Financial

A LEGACY OF GIVING

The La Trobe Financial Foundation has been operating since 1978, delivering millions of dollars’ worth of grants and donations since inception At the 2020 Marketing, Advertising and Sales Excellence Awards held in June, La Trobe Financial received the ‘Community Initiative of the Year’ award This award recognised not only the gift of a substantial donation to the bushfire relief and payment delays provided for distressed mortgagees and customers, but also the foundation’s commitment to the community over the last 40-plus years Caterina Nesci, La Trobe Financial’s executive head of foundation and product marketing, said the true heroes were the firefighters and frontline workers, such as those now fighting COVID-19

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In partnership with

Above: La Trobe Financial staff giving back to the community; Greg O’Neill, president and CEO (top left) and Caterina Nesci, executive head of foundation and product marketing (top right)

customers through this challenging time,” he says.

“When the chips are down, Australians have a proud record of standing behind and supporting each other. We should all be going out of our way to assist these frontline workers, thank them, and tell them what an amazing job they’re doing.”

Dr Lachlan Henderson, CEO of Epworth Hospital, welcomed the substantial donation, which has been “put to immediate use in our critical care expansion”.

“Our relationship with La Trobe Financial now goes back many years, and it’s been an incredibly generous organisation to work with and one that is truly responsive; they are a first-class organisation and well respected in their industry.

As one of the largest not-for-profit hospital groups in Victoria, this

$1m donation has been put to immediate use in our critical care expansion,” Henderson says.

“We again place on record our

range of assistance measures put in place by La Trobe Financial to support its customers who have been financially impacted by the

“Until a vaccine is produced, it’s about our character as a nation – who we are when placed under pressure” Greg O’Neill, president and CEO, La Trobe Financial thanks to Greg O’Neill and his team at La Trobe Financial. We have very important work to do over the coming weeks and months, and this has helped us achieve that objective of keeping many Australians in better care.”

The $1m donation follows a

COVID-19 pandemic, including allowing home loan customers to apply for a four-month repayment moratorium to assist with cash flow.

It also offers tailored hardship relief solutions for small business borrowers, which may include deferral of scheduled loan

repayments; the waiver of fees and charges; temporary interest-only periods to assist with cash flow; and debt consolidation to help make repayments more manageable.

“There are no more important jobs right now than the brave doctors and scientists working around the clock to solve this issue. Until a vaccine is produced, however, it’s about our character as a nation – who we are when placed under pressure and how we respond,” O’Neill says.

“Australians are generally an unassuming bunch, but we are at our best when circumstances are at their worst. It’s what makes Australians so special.”

La Trobe Financial has set up a dedicated Hardship Assistance team, which is ready to assist brokers and their clients with compassionate and prompt service at this difficult time. AB www.brokernews.com.au

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PEOPLE

Have an interesting deal?

Had a particularly difficult or interesting deal? Why not share it with us? Email:

sarah.megginson@keymedia.com

BIG DEAL

For Mary Sartinas, director of Affiliate Finance & Property, this clunky development finance deal presented some big challenges – but her creative solutions got her borrowers out of a pickle THE FACTS

Client Married couple

Loan size and term $1,010,000 over a 12-month term

Goal To fund the construction of a multi-unit development

Location Geelong, Victoria

22

Aggregator Finsure

fund the project, they typically require the borrower to obtain presales to demonstrate that a certain percentage of the debt will be cleared on completion of construction.

In this instance, the clients couldn’t even attempt to sell any of the houses off

THE SCENARIO

A Melbourne-based company that specialises in coordinating and project managing property subdivisions referred this couple to me. The couple had purchased a property with a 12-month settlement period, and the referral company had not only sourced the potential development site for the clients but also gone through a planning process and obtained a permit for multiple units, all before the settlement date was due.

Let’s rewind the clock to 12 months earlier, when the clients made the commitment to secure the site. At the time they felt confident that they would secure a loan through their bank; however, given the time it takes to obtain a development approval, the funding process was postponed until closer to settlement, as they assumed it would all fall into place.

When the clients did approach their bank, with which they had all their accounts and lending facilities and a relationship going back many years, they were told it was unable to assist, as the clients could not service the proposed debt.

Naturally, the clients were perplexed, as they had anticipated their bank would fund the deal purely on the backing of the security and their exit strategy, which was to clear the debt through sale of the completed project. Unfortunately, this is a common misconception. Mainstream residential lenders don’t work that way, as they still need to see that the borrower is able to service the overall debt.

There are a few select specialist and commercial lenders that would consider funding the deal on the basis of the proposed exit strategy; however, before they

Lender Paramount

I presented to my clients an outline of my recommendations, which included using the equity in an unencumbered property they already owned, along with the title of the new site they were purchasing, to fund 100% of the acquisition and ongoing costs and capitalisation of interest until completion.

With this kind of scenario, it was essential that I prepare a sound proposal to provide a prospective funder with a clear understanding and the confidence to back the deal. The research and data I presented not only outlined the client’s personal and professional background but also the project manager’s history, and along with it the feasibility study of the development, the way in which it was going to be executed and finally the exit strategy. This level of preparation, although time-consuming, is absolutely necessary to cement a funder’s confidence. In turn, they presented offers that I could take back to the clients.

We went through every point in detail and engaged in further negotiations,

The settlement date was looming … but the clients were at a loss what to do, considering that the lenders they had approached had given them a resounding ‘no’ the plan because they had not yet taken ownership of the site. The settlement date was looming, and they had to source the funds and settle, but they were at a loss what to do, considering that the lenders they had approached had given them a resounding ‘no’.

THE SOLUTION

Mary Sartinas Director, Affiliate Finance & Property

When I reviewed the project I could see it was well planned and executed, and I was confident I could source funding. The clients were well placed financially, with several income streams from businesses and rental properties. But this was not enough to service the loan they required.

I researched options that would accommodate the project, and it came down to private funding. The challenge was to find funding with flexible terms, along with pricing and fees that did not compromise the bottom line of the project.

I contacted a number of private channels and received two positive responses.

including revision of the funder’s pricing and exit terms. One of the key requirements for the client was that the facility term would not expire midconstruction, so we needed a contingency to extend it at minimal cost if required, and also to exit the funding agreement at minimal cost. It required some sweat in the negotiation process; however, we reached a point where all parties agreed.

THE TAKEAWAYS

The days leading up to settlement were intense as there was still a significant amount of work to be done in coordinating various parties and ensuring that after 12 months the clients could settle on the scheduled date. When it came to fruition there was an enormous sense of relief.

This kind of scenario, although complex, is not uncommon. Seeking the right advice and guidance from the outset can save borrowers a significant amount of time and effort and eliminate some of the stress. AB

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OPINION

THE BIG ISSUES TO DISCUSS WITH BORROWERS Despite the economic challenges we’ve seen during the COVID-19 pandemic, there’s still demand for residential and commercial finance. However, Jason Fallscheer says there are key aspects of the financing process that brokers need to ensure their clients understand, now more than ever banks have been inundated with loan applications since the start of the pandemic. Part of this activity has been driven by the promise of cashback offers for refinancing, as well as record-low rates.

As a result, the turnaround time for processing applications has increased, with applications taking weeks, sometimes months, to process. When the deal is approved and refinancing is complete, some clients can’t access the discounts that drew them to a particular bank in the first place.

Maintaining public faith is critical for the banks, especially now, and some of these offers are dangerously close to being doorbuster specials. This presents a quandary for the banks: how are they going to look after customers whose applications have been in the processing queue for weeks?

In the case of clients refinancing to take advantage of a bank’s current offers and low interest rates, brokers need to help them weigh up whether it’s worth waiting for an application to be processed, rather than exploring other options. This is where it’s particularly important to help your clients assess all options and calculate the cost of processing delays, and keep them abreast of factors impacting approvals at the moment, such as applicant quality.

Right now, applications really need to be close to perfect. Applications are currently being rejected for simple administrative mistakes, due to increased demands on lending teams. Of course this is frustrating for brokers and their clients, but it highlights the role brokers play in giving borrowers the best chance of success upon loan submission.

Administrative considerations aside, borrowers also need to think about their priorities in choosing a lender, and where they’re willing to be flexible. For example, some banks still require face-to-face appointments to set up accounts. Income

verification is also more intense than ever before. While income verification for PAYG salaries may be more straightforward, people with other types of income, such as bonuses, may face more rigorous income verification. As a broker, you can help your clients explore different funders and make sure their application is strong the first time.

There’s been a large influx of applications for refinancing home loans to fixed rates to take advantage of the historically low interest rates. The gap between variable rates and fixed rates has widened, with rates up to 0.7% cheaper on fixed rate home loans. Moving to a fixed rate is particularly beneficial for clients paying higher rates due to factors such as higher loan-to-value ratios.

AUSTRALIAN

quality referral channel too.

If a borrower can’t change their home loan right now, think about how you can help them in other ways. Can you look at refinancing as soon as their income situation changes? Or could you help them reflect on how their long-term financial goals have changed? These clients may not be immediate business prospects, but demonstrating care now will mean you’re top of mind when their financial situation changes.

For brokers with a client base that includes commercial borrowers, it’s important to note that those businesses that have used JobKeeper to maintain their workforce will need to forecast how their finances will be impacted later in the

Right now, loan applications really need to be close to perfect. Applications are currently being rejected for simple administrative mistakes, due to increased demands on lending teams

Jason Fallscheer Client director and credit representative, Pitcher Partners Finance

For brokers, these clients should be a priority, and rates can be a helpful starting point for checking in with all your clients.

Brokers typically aim to contact their clients at least once or twice a year; if you’ve been lax in checking in with your clients, now is the time to contact them. If a client isn’t getting the best rate, work with them to explore other options with their current bank and benchmark against the market.

While refinancing can seem daunting for clients, especially in uncertain times, it’s important to communicate to them that having a broker prepare an application could deliver years of benefits.

Remember, a client who gets ongoing support from their broker can be a

year. Now is the time to be talking to your commercial clients to help them establish a strong plan before JobKeeper ends.

With a lot of Australia’s wealth stored in property, house prices often drive consumer sentiment. While Australia is now in a recession, the amount of lending activity and demand in the residential and commercial markets demonstrates that consumer sentiment is still strong.

That, however, doesn’t mean people and businesses can be complacent. Be proactive and help borrowers shore up their financing now so they can be prepared for potential scenarios as 2020 progresses – whether we see a stronger recovery or a more subdued end to the year. AB www.brokernews.com.au

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Get involved in the discussion Share your thoughts at

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FROM THE FORUM

Top comments from trending stories on brokernews.com.au

ASIC’S RESPONSIBLE LENDING APPEAL AGAINST WESTPAC DISMISSED ASIC’s appeal to overturn the dismissal of its responsible lending case against Westpac Group, which was handed down in the second half of 2019, has been rejected by the court. A judge had previously ruled on Westpac’s alleged breach of responsible lending laws in assessing the suitability of nearly 262,000 home loans for customers between December 2011 and March 2015. ASIC had last year accused the major bank of breaching the National Consumer Credit Protection Act 2009 when it assessed the loans through its automated system and relied solely on the benchmark household expenditure measure (HEM) rather than the customers’ declared living expenses.

In his judgment last year, Justice Perram found that a customer’s current living expenses were not an important indicator of whether they could afford their home loan, as their expenses could be cut if necessary. He delivered his now-famous ‘Wagyu and Shiraz’ line, stating: “I may eat Wagyu beef every day washed down with the finest Shiraz, but if I really want my new home I can make do on much more modest fare.” In other words, a person’s living expenses should be calculated based on their minimal obligations as set out by HEM, rather than their actual spending habits.

Two of the three judges assessing ASIC’s appeal, Justices Michael Lee and Jacqueline Gleeson, found Justice Perram’s decision should stand.

Wow, that’s huge! It’s a mammoth slap in the face to ASIC – they not only overstepped their powers; they illegally imposed millions of dollars in fines and deprived thousands of Australians from borrowing responsibly. ASIC then held the big stick, intimidating lenders to enforce their regime, even after they were defeated in court. During all that time, ASIC was so busy telling us of our responsibilities, they neglected their own.

Steve McClure

Now, ASIC, go back to fining fish ’n’ chip shops for using old oil – that’s about all the clout you have.

Craig

It’s not surprising that people without an intimate knowledge of how the home lending industry, both lenders and brokers, operates, are likely to draw incorrect conclusions about operational practices and procedures. This failure to fully understand the industry was displayed by Royal Commissioner Kenneth Hayne, who failed to interview any lenders or mortgage brokers about day-to-day procedures for home loan assessment and therefore drew conclusions, and made recommendations, without knowledge of all the facts. Interviewing the CEO of a big four bank does not provide detailed insight into the inner workings of the industry, which can only be achieved by talking to those working ‘at the coal face’. It is therefore not surprising that ASIC also struggles to fully understand the industry.

The same can be said about Westpac, which blindly agreed to the ill-fated agreement with ASIC to a $35m penalty.

Ray Weir

Just outcome. Regulation needs to be specific if the regulators are looking for specific outcomes. Being specific also implies direction, where the regulator seems to be a little lacking.

Scrumptious!! I’m really enjoying this Wagyu with my Shiraz!

The regulators of the banking industry have demonstrated their total inability to undertake their responsibilities, and it is about time they were given a thorough clean-out, starting from the top.

Enough of this bureaucratic laziness to take the easy road rather than do the task they have been charged to do. There are plenty of people from the banking and financial and insurance industry with the necessary experience to be able to supervise their activity far more efficiently than has been the case thus far.

P. Doff

Quaggie

Brendan Jordan

What a totally unsurprising outcome.

WP

24

www.brokernews.com.au

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PEOPLE

Do you have a question for our broker mentors?

Email your question to:

sarahmegginson@keymedia.com

BROKER ON BROKER

With a background in chartered accounting and as the head of a company that provides a range of business and financial services, David McCleery takes a holistic approach to broking. He shares his take on opportunities for brokers on the pathway to the ‘new normal’

What are the biggest opportunities for mortgage brokers in the current market?

Brokers now have a great A chance to confirm or change the positioning of their brand and the services they provide, or who they want to provide services to. In recent months there has been such an increase in activity, but at the same time a reduction of income for

Q

bigger can down the road in terms of payment obligations towards the end of their loan terms. The government has introduced many support measures to assist SMEs, and a lot of customers are seeing that as an opportunity – but these governmentbacked loans need to be repaid over a pretty short period of time, so brokers play a key role in educating borrowers about the real-world

“Brokers can spend more time adding value, getting right into the weeds of the customer’s financial situation ... rather than just focusing on the transaction at hand” brokers. Brokers need to do some financial modelling, look at their WIP, and prioritise those business functions that are critical to driving value and generating income.

How has the role of brokers evolved during COVID-19?

Lenders are managing massive A credit and compliance risks, customers have their own needs and pressures, and brokers play a critical role in managing the bridge between those different stakeholders. The impact of home loan deferrals has been significant. We’ve had some clients talking about suspending their loans for six months; however, that means they could be kicking a

Q

implications. That’s another trend we’ve seen in the last few months: brokers are going back to playing a more sustained, strategic role with their clients, rather than a purely transactional role.

Q Brokers currently write around 60% of residential mortgages. Is this likely to increase after COVID-19?

The last part of the broker A penetration story is going to be difficult to achieve. I think the pandemic will help with deeper penetration. A lot of the compliance changes over the last five years have been positive for the industry overall, and COVID is going to shine a light

David McCleery, director, MCP Financial Services

on those elements even more.

But the customer hasn’t really seen the value of so many of the compliance processes that we’ve been undertaking. What they ultimately do is allow for tasks to be sped up and completed with more autonomy so the broker can spend more time adding value, getting right into the weeds of the customer’s financial situation, and providing a broader service, rather than just focusing on the transaction at hand.

Do you believe banks’ swift uptake of digitisation is a trend that’s here to stay?

In general terms, once you make A an innovation to a process, you don’t go back. Once the industry sees digitisation and VOI techniques are working well, why would you go back?

It’s a point of difference that lenders can leverage, too, by using tech and the innovations of open banking to make the process more efficient, so I just can’t see it going away. AB

Q

PITSTOP MENTORING Are you new to the industry, or simply keen to learn from experienced brokers who have words of wisdom to share? This is your opportunity for pitstop mentoring! If you have a question you’d like a senior broker to answer, contact us and look out for an expert answer in a future issue.

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6/07/2020 1:14:45 PM

DATA

WESTERN AUSTRALIA

Despite the current challenges, Perth rental stock has been quickly absorbed According to the Real Estate Institute of Western Australia (REIWA), rental listings in Perth fell in May to 4,676, the lowest level recorded since November 2013. Damian Collins, president of REIWA, said this indicated that the city’s housing market was “doing quite well” amid the uncertainties of the COVID-19 crisis.

“The strong demand we have seen for rental properties continues, with a 27% increase in leasing activity compared with April, and the vacancy rate dropping significantly in the last two years,” he said.

Halls Head reported the strongest growth in rental activity, with 33 property leases taken in May. Other suburbs with robust monthly leasing activity include Nollamora, Coolbelup, Joondalup, and Como.

The median weekly rental rate remained stable over the month at $350. Collins said he expected rents in Perth might remain the same until the end of the year.

Area

Median

Quarterly

12-month

Weekly

Gross

price

growth

growth

median

rental

rent

yield

Metro (H)

$470,000

-1.0%

-3.1%

$380

4.2%

Metro (U)

$370,000

0.0%

-2.6%

$350

4.9%

Country (H)

$335,000

0.0%

-0.5%

$360

5.7%

Country (U)

$195,000

-4.9%

-11.2%

$320

8.3%

TASMANIA SPOTLIGHT

REGIONAL TAS ON THE RISE Tasmania’s Launceston and North East region recorded the highest growth rate of all regional areas in the state, according to CoreLogic and the North East remained the top-performing region in Tasmania over the April 2020 quarter, securing the top spot for the second consecutive three-month period.

Over the three months to April, house prices in the region grew by 7.1% year-on-year, while unit values went up by 13.6%.

“Launceston and North East Tasmania have unsurprisingly seen an uplift due to a spillover of demand from Hobart and a bullish sentiment towards Tasmanian property markets,” said Eliza Owen, head of research at CoreLogic.

LAUNCESTON

Demand pre-COVID-19 However, Owen said it was crucial to note that since the growth rates were on annual basis,

QUEENSLAND

Australians are more likely to relocate to Queensland than any other state

TASMANIA’S ‘CONSTRUCTION BLITZ’ PACKAGE Source: Tasmanian Government

A report from the ABS on the movement of Australians in 2019 shows that Queensland had a net gain of 22,831 people migrating to the state from within the country. This figure was almost double the 10-year average of 12,409.

The state has been reporting a high rate of interstate migration since 2017. Downsizers and young families are two of the most common relocators to Queensland.

The Sunshine Coast was the top regional destination, recording a net gain of 6,400 last year.

John McGrath, founder of McGrath Estate Agents, said job creation and the current projects in this regional centre had been attracting more people.

Given the current and upcoming developments, Queensland’s two regional centres actually have a higher median price than the state capital.

According to CoreLogic’s April 2020 report, homes had a price tag of $665,000 in the Gold Coast and $660,000 in the Sunshine Coast. On the other hand, Brisbane’s median value was $508,000.

Area

Median

Quarterly

12-month

Weekly

Gross

price

growth

growth

median

rental

rent

yield

Metro (H)

$538,000

0.0%

1.3%

$420

4.0%

Metro (U)

$385,000

0.0%

0.8%

$390

5.2%

Country (H)

$435,000

-0.4%

1.1%

$400

4.7%

Country (U)

$378,000

0.7%

0.0%

$355

4.9%

26

they reflected much of the demand prior to the onset of the COVID-19 outbreak.

Figures for the April 2020 quarter indicate the impacts of the pandemic on Launceston and the North East, with house sales declining by 11.3% and unit take-ups dropping by 9.5%.

Overall, residential property sales in this region were 11% lower than in the previous year and 7.3% below the five-year average.

According to sales data for the quarter, the most popular homes in the region had a median price range of $200,000 to $400,000.

On average, houses remained on the market for 33 days before being sold and units for 34 days.

“This could represent a reversal of the housing demand dynamics we’ve observed over the past few years,” Owen said.

The package is expected to deliver $3.1bn in construction value over the next two years across several sectors, including housing

Around 15,000 jobs will be generated by the construction projects

2,300 new dwellings, including social and affordable housing, will be built across the state

A $20,000 grant will be available to owner-occupiers to build new houses

SUBURB TO WATCH: BELLERIVE Median price (houses) $640,000

Median price (units) $448,500

12-month growth

3-year growth

Average annual growth

Indicative gross rental yield

7%

42%

5.9%

4%

12-month growth

3-year growth

Average annual growth

Indicative gross rental yield

6%

42%

3.96%

5%

www.brokernews.com.au

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6/07/2020 1:17:47 PM

AUSTRALIAN CAPITAL TERRITORY

Stamp duty reductions expected to save homebuyers thousands of dollars The government of the ACT has announced stamp duty reductions for owner-occupiers as part of its recovery plan to support local jobs. Buyers of new-land single residential blocks will have their stamp duty waived. Those who buy off-the-plan apartments and townhouses valued at up to $500,000 will also not be charged stamp duty.

The stamp duty for off-the-plan apartments with price tags of $500,000–$750,000 will be reduced to $11,400. Homebuyers can apply for the waiver until 30 June next year.

At the same time, the ACT government will be extending the Pensioner Duty Concession Scheme for another year. Under the concession scheme, pensioners purchasing a home for less than the median property value will be given a full or partial stamp duty cut.

ACT Chief Minister Andrew Barr said these initiatives were expected to help homebuyers save thousands of dollars, whether they were entering the housing market for the first time or looking to move.

Area

Median

Quarterly

12-month

Weekly

Gross

price

growth

growth

median

rental

rent

yield

Metro (H)

$700,000

1.5%

4.6%

$580

4.4%

Metro (U)

$440,000

0.7%

2.6%

$480

5.7%

NORTHERN TERRITORY

The NT’s Home Improvement Scheme aims to boost construction activity

HIGHEST-YIELD SUBURBS IN TASMANIA Suburb

Property

Gross rental

Median

Quarterly

12-month

Average

type

yield

price

growth

growth

annual growth

QUEENSTOWN

H

11%

$83,000

0%

14%

0.8%

ROSEBERY

H

10%

$85,000

-1%

1%

-0.9%

HADSPEN

U

9%

$165,000

5%

-18%

5.0%

ZEEHAN

H

8%

$122,500

19%

53%

4.8%

TULLAH

H

8%

$122,500

2%

18%

16.7%

MAYFIELD

H

8%

$173,750

-1%

-7%

1.4%

SHOREWELL PARK

H

7%

$198,500

1%

18%

4.6%

HERDSMANS COVE

H

7%

$239,500

8%

14%

12.3%

GAGEBROOK

H

7%

$232,500

6%

11%

8.6%

BROOKLYN

H

7%

$202,250

0%

10%

3.3%

To help support the local economy amid the COVID-19 crisis, the NT government initially allocated $30m to the Home Improvement Scheme, which was later expanded to $100m.

The scheme is expected to progress 20,000 “screwdriver-ready” projects across the territory.

Operating on a voucher system, it will grant homeowners up to $6,000 for renovation works.

Will Johnson, local expert at Herron Todd White, said the scheme was not only a great incentive for home improvements but also a kick-starter for trades and services. “Another great positive … is that investors can also benefit, the government making it clear from the onset that investors who own a home and are resident in the Northern Territory could also benefit,” he said.

In terms of the housing market, Johnson said the NT was still in a wait-and-see position. “If we can continue on the current trajectory, with social distancing and also avoiding the second wave, we may see confidence return much sooner than expected,” he said.

Area

Median

Quarterly

12-month

Weekly

Gross

price

growth

growth

median

rental

rent

yield

Metro (H)

$470,000

-0.9%

-5.1%

$480

5.4%

Metro (U)

$287,500

0.0%

-10.4%

$360

6.2%

Country (H)

$435,000

0.6%

-4.7%

$500

6.3%

Country (U)

$305,000

-2.9%

-6.0%

$373

6.5%

www.brokernews.com.au

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DATA

NEW SOUTH WALES

Many Sydney homeowners have used COVID-19 downtime to begin renovations Matt Halse, local expert at Herron Todd White, said that while it was not uncommon to see residential properties being renovated in the inner suburbs of Sydney, there has been a noticeable uptick in home renovations during the COVID-19 restrictions.“One of the reasons we anticipate minor renovations to be evident in the short term is due to people being locked up at home and looking for constructive projects to complete around the house,” he said.

Halse said that even larger renovation projects had started to pick up as builders and tradespeople were engaged at a potentially reduced cost. He believed renovations by investors were also likely to continue, especially of older-style dwellings.

“It will be imperative that investment properties are presented in the best possible condition, otherwise tenants will quickly choose a competing property in superior condition or alternatively demand a discounted rental price for any subpar properties,” he said.

Median

Quarterly

12-month

Weekly

Gross

price

growth

growth

median

rental

rent

yield

WEEK ENDING 29 JUNE 2020 There were 1,424 homes scheduled for auction this week, returning a preliminary auction clearance rate of 64.5%. This was the highest number of auctions held in nine weeks, demonstrating an ongoing improvement in seller confidence as auction clearance rates hold reasonably firm under higher volumes. In comparison, the previous week saw 1,251 homes taken to auction, returning a preliminary clearance rate of 66.1%, which later revised down to 59.6%. This time last year 1,295 homes were taken to auction across the capital cities, and a clearance rate of 62.9% was recorded. There were 623 Melbourne homes scheduled for auction this week, returning a preliminary auction clearance rate of 62.7%; Sydney saw 614 homes go up for auction over the week, returning a preliminary clearance rate of 66.9%. This time one year ago, 535 auctions were held in Melbourne and 503 in Sydney.

ADELAIDE Total auctions

25

Cleared

19

Uncleared

6

PERTH Total auctions

7

Cleared

5 2

Metro (H)

$927,000

1.1%

-0.3%

$550

3.1%

Metro (U)

$717,000

1.1%

-0.6%

$530

3.9%

Uncleared

Country (H)

$485,000

0.4%

2.6%

$400

4.3%

Clearance rate

Country (U)

$424,500

1.2%

2.4%

$350

4.3%

Median

Quarterly

12-month

Weekly

Gross

price

growth

growth

median

rental

rent

yield

Units

Sydney Melbourne Brisbane

Adelaide

Hobart

Darwin

$450,000

$728,000

$525,000

$523,000

$460,000

Perth

$269,900

$0

$320,000

$100,000

$350,000

$200,000

$460,000

$300,000

$360,000

$500,000 $400,000

$485,000

$600,000

$540,000

$700,000

$690,000

$800,000

$650,000

Figures from SQM Research show that over the month of May around 4,000 residential properties were added to Melbourne’s listing stock, equivalent to 11.6% growth. This brought the city’s overall listings to 38,447, the highest among all capitals.

On an annual basis, Melbourne reported the smallest decline in listings, at 4.3%.

Australia’s national listed stock increased by 3.9% over the month to 304,137. Louis Christopher, managing director at SQM Research, said this increase was driven by older stock remaining on the market, rather than sales. “New listings actually fell for the month at the national level, which is abnormal for May. Though we have recorded rises in new listings for Sydney and Melbourne, other cities such as Brisbane, Adelaide and others recorded a decline in new stock,” he said.

The increase in Melbourne’s residential listing stock came as prices started to show weakness.

Recent figures from CoreLogic show that Melbourne’s median house value declined by 0.9% in May to $686,798.

Houses

$900,000

$797,123

Melbourne reported the highest jump in residential listings in May

Canberra

CAPITAL CITY HOME VALUE CHANGES Capital city

Weekly change

Monthly change

Year-to-date change

12-month change

Sydney

-0.2%

-0.8%

3.2%

13.4%

Melbourne

-0.3%

-1.0%

0.6%

10.4%

Brisbane

-0.3%

-0.3%

1.5%

4.4%

Adelaide

-0.2%

-0.2%

1.3%

2.1%

-0.2%

-1.1%

-0.6%

-2.4%

-0.2%

-0.8%

1.8%

9.1%

Metro (H)

$727,000

1.4%

1.7%

$430

3.1%

Metro (U)

$575,000

1.8%

8.5%

$430

3.9%

Perth

Country (H)

$388,000

1.3%

5.6%

$350

4.8%

Combined 5 capitals

Country (U)

$292,750

0.8%

9.3%

$285

5.0%

28

71.4%

MEDIAN HOUSE AND UNIT PRICES

VICTORIA

Area

76.0%

Clearance rate

$355,000

Area

CAPITAL CITY AUCTION CLEARANCE RATES

*The monthly change is the change over the past 28 days

www.brokernews.com.au

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BRISBANE CANBERRA Total auctions

26

Cleared

23

Uncleared

3

Total auctions

42

Cleared

20

Uncleared

22 47.6%

Clearance rate

88.5%

Clearance rate

SYDNEY Total auctions

332

Cleared

222

Uncleared

110 67.3%

Clearance rate

TASMANIA

MELBOURNE Total auctions

467

Total auctions

0

Cleared

293

Cleared

0

Uncleared

174

Uncleared

0

Clearance rate

62.7

Clearance rate

SOUTH AUSTRALIA

Area

n.a.

Median

Quarterly

12-month

Weekly

Gross

price

growth

growth

median

rental

rent

yield

Competition is heating up as COVID-19 restrictions are gradually lifted Katherine Skinner, SA director at National Property Buyers, said Adelaide could be seeing increased competition in the property market due to several factors. “There is a critical shortage of stock across all markets and areas. Combine this with such low interest rates, and there is significant competition for homes that would normally not see such levels in normal circumstances,” she said.

CoreLogic figures show that the median value of homes in Adelaide grew by 0.4% in May, defying the overall downturn. It is one of the three capital cities that recorded an increase in the median that month. Adelaide also saw increasing interest from investors in the eastern states, but they are facing growing competition as owner-occupier sentiments improve. “This is ensuring the market remains buoyant, with many first-home buyers looking to break into the market, as well as owner-occupiers, which are making things more challenging for investors looking to find quality stock,” Skinner said.

Metro (H)

$465, 000

0.0%

1.8%

$385

4.4%

Metro (U)

$326,172

-0.4%

0.1%

$330

5.1%

Country (H)

$280,000

0.0%

1.9%

$270

5.1%

Country (U)

$210,000

0.0%

0.0%

$210

5.2%

Source: Except where otherwise stated, all data sourced from CoreLogic, June 2020

NICK YOUNG: TRAIL BOOK SALE EXPERT Sell your book. Keep your clients.

Release working capital or start succession planning.

03 8508 6666 | 0417 392 132 | nyoung@trailhomes.com.au | trailhomes.com.au www.brokernews.com.au

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PEOPLE

Aggregator: Choice Aggregation Services

IN THE HOT SEAT

When Kirsty Dunphey, director of Launceston-based Up Loans, transitioned from a career in real estate to her own mortgage brokerage, she thought it would be a simple cross-step into a similar industry.

But ‘it was a steep learning curve,’ she says, ‘and one I’m still on!’

What was your first job before the finance industry? worked in my parents’ businesses since I was a child A I’ve (laundromat, property investment, petrol station, fishing shop and more!). I was really entrepreneurial from a young age.

I started my own businesses, beginning with my own jewellery market business importing jewellery from Thailand at 15; a web design business, also at 15; and owning my first real estate agency at age 21. My first paid ‘jobs’ were also at 15: one in an ice-cream shop and one at a real estate agency. I definitely preferred the one where I got free ice cream and doughnuts.

Q

Moving from real estate into mortgage broking, what was the biggest surprise for you?

A The overwhelming kindness of the broker community.

People aren’t as cut-throat as I was used to in real estate.

The broker in another state is there to commiserate with you when you’ve had a tough day, and your closest broker down the road is still a mate and doesn’t see themselves as your competitor. If you have a question, they’ll answer it kindly and helpfully. Broking is a very, very welcoming and friendly industry.

Q

If you could change anything about the broking industry, what would it be?

A Less compliance and paperwork. I get that it’s necessary, but I often wonder just how many more people we could help if our average time to get a file ready wasn’t 10 hours.

ongoing basis at annual check-ups and other times. And they don’t pay them! That really does sound too good to be true, and that’s the easiest part of my job – there’s no sales pitch. Who wouldn’t want that?

What is the one thing you wish everyday borrowers knew about finance? it seems too good to be true, it probably is (for example AfterPay, A If credit card limit increases, interest-free cards). The one thing that really does seem like it’s too good to be true to me is that a member of the public can go to a broker, have them work diligently, compare huge numbers of lenders, end up with the same or a better interest rate than if they’d gone directly to the bank, and oftentimes give them a significantly altered customer service experience. And then they can have that same broker fight for their rate on an

If you weren’t a broker, what would your ideal career be?

A A travel portrait photographer. I’m an amateur photographer, and I’m happiest when on a plane or in a foreign land, being fascinated by the new tastes, smells, sights and faces. I’ve made travel a huge priority in my life, and I spend about three months of the year travelling (and working remotely). I have two kids who are awesome travel buddies every school holidays, and we’re hanging out for the time when the world reopens and we can get back out and explore. AB

Q

Q

30

Q

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16 OCTOBER 2020 • THE STAR SYDNEY

THANK YOU FOR YOUR NOMINATIONS Australian Broker would like to thank its readers for the incredible response to the call for nominations for the 2020 Australian Mortgage Awards. It’s great to see so many talented professionals and organisations who have excelled over the past year.

Finalists will be announced in September. Winners will be revealed live and celebrated at the highly anticipated black-tie awards gala on 16 October at The Star Sydney.

BE PART OF THE INDUSTRY EVENT OF THE YEAR Visit australianmortgageawards.com.au for table reservations or sponsorship opportunities

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