TMM How to have a home and eat it too 03/2024

Save time, stay safe

What support should you be seeking from your adviser network?

Advisers have more choice than ever before when it comes to Financial Advice Providers (FAPs) and compliance solutions, technology platforms and business support services offered by adviser networks. How do you determine the best fit for you and your business?

In New Zealand, almost every independent adviser business aligns with an aggregator or network, recognising the challenges of thriving without support in this dynamic financial advice landscape. For mortgage advisers, membership is a requirement.

The type and level of support required varies from business to business, but there is one thing all advisers value highly - and that’s time. Work overload and the pursuit of work life balance is becoming more of a stressor for advisers. The additional requirements that regulation brings plays a big part here, but running a successful advice business involves a lot of hard work and dedicationfinding and onboarding new clients, servicing current clients, people

management, succession planning, ongoing education … the list goes on.

At NZFSG, we sweat the details so advisers can get on with what they do best. We work tirelessly to ensure we have market leading technology, processes and support capabilities to empower them to operate with confidence in the new regime. We provide everything they need to streamline their operations, build a sustainable business, and save time.

Our all-in-one tech platform (MyCRM) has been the foundation of our business since we started, and now, as we share its development with our wider Loan Market Group (LMG) family across the ditch, digital transformation is continuous, with a compliance-by-design approach that reflects our dedication to stay ahead of the game.

It’s also really important to have someone in your corner. Belonging to a network that has scale and a strong industry reputation is a key thing to consider. Our adviser community values our 20 plus years of experience, knowledge and the expert support team that stands behind them.

Recent experiences have proven that the allure of independence or shiny new offerings may not always be as it seems, and previous members have returned seeking the stability and support of NZFSG. The grass isn’t always greener, there’s a lot to consider when deciding to join an adviser network or going out on your own. It’s important that you make a fully informed decision.

Key questions to consider:

• Do you have access to best-inmarket solutions that save you time and keep you safe in the new regulatory environment?

• What training, learning and development do you need to elevate your skills?

• Are daily commission payments important for the operation of your business?

• Are you seeking ways to grow and diversify your business?

• Do you value the business relationships, networking and support of a large adviser community?

Whatever your choice, it’s imperative you ensure that your operational framework provides everything needed for the safe, efficient, and sustainable running of your business.

About New Zealand Financial Services Group

New Zealand Financial Services Group (NZFSG) is the leading financial services provider in New Zealand, dedicated to empowering 1,150 advisers with a choice of services to help them excel in insurance, residential, commercial and asset finance. With a focus on innovation and excellence, NZFSG is committed to helping New Zealanders secure their financial futures. ✚

New Zealand’s largest financial services group working for you

NZFSG is the business partner of choice for New Zealand’s largest community of financial advisers with over 20 years of experience in mortgage and insurance distribution and the widest range of quality service offerings in the market.

We're in it for the same reasons you are ... to help Kiwis achieve their financial dreams

Each year we help 55 THOUSAND Kiwis get ahead financially. ONE in THREE Kiwis arrange their home loan through our network.

We save you time

MyCRM powers every component of your business to help you run faster and smarter It’s the engine behind the industry’s most productive advisers, providing a robust advice process and streamlining operations at every touchpoint - freeing up your precious time and enhancing the customer experience.

We keep you safe

Our Assurance Programme empowers advisers to operate with confidence in the new regime We take the stress away by providing you with all the tools, processes, training and support to stay safe and get on with what you do best

We help you grow your business

Unlock a wealth of opportunities to support your clients and grow your business with access to New Zealand’s largest range of lenders and insurers, competitive remuneration terms, daily commission payments, referral and revenue solutions, training resources, events and more.

Sourcing non-bank finance for your prime clients? If the rates are double digits, there may be a better fit.

Keen to know more? Contact the property lending specialists at Resimac.

ADVISERS WHO STAND UP FOR THE INDUSTRY

Earlier this month the Commerce Commission held a three-day conference discussing its review of the banking sector.

One of the many interesting sessions was on the final day, around mortgage advisers. You can read about it on page 18.

As readers of tmmonline.nz will know, many advisers were upset with the commission’s draft report and its lack of understanding around where mortgage advisers fitted into the market and how they operated.

Some of the takeaways for me from this session included a revelation of the potential leaders of the mortgage advice world. Big hat tip to the likes of Sarah Curtis, Jeff Royle and Paul Fuller, some of the advisers who spoke at the conference.

The advisers who took part in the conference and submissions processand there were a number - should be congratulated for advocating for the sector and their peers.

When it comes to the two associations, the country head of the new Financial and Mortgage Advisers Association, Leigh Hodgetts, was present and made a number of constructive observations.

Her counterpart at Financial Advice New Zealand presented a rather bland statement, saying that financial advice is a prerequisite for good outcomes.

Hamish Patel, the chair of Financial Advice NZ’s mortgage member advisory committee, spoke - but it is unclear whether this was in his own capacity or on behalf of the association.

Sadly, none of the dealer groups

Head office & Advertising

1448A Hinemoa Street, Rotorua

PO Box 2011, Rotorua

P: 0274 377 527

E: philip@tmmonline.nz

Publisher Philip Macalister

Staff writers Sally Lindsay

Contributors

Paul Watkins, Jenny Ruth, Lee Kerr, Kelvin Davidson

appeared to be represented - none spoke, at any rate – although, in fairness, Link Financial Group made submissions on the draft report.

However, the chief executives of all the big banks appeared in person. While sometimes they were slow to answer specific questions directed at them by the commission, they were there and contributed.

Another insight was into the questions the commission had prepared and presented to the conference.

My observation is that they looked to Australia, and what its regulator, the Australian Securities and Investment Commission (ASIC), does - and suggested they take the same approach in New Zealand.

Sure, it’s fine to look at how other jurisdictions operate, but the commission needs to be mindful the New Zealand market is different.

Hopefully, the commission is now better educated about how mortgage advice works – a new understanding we hope will be detailed when it releases its final report in August.

Philip Macalister Publisher

55 billion reasons to be happy with ANZ

The proportion of home loans originated by advisers at ANZ, the country’s largest bank, continues to grow.

In the most recent reporting period to March 31, advisers accounted for 63% of all home loans written.

Perhaps more importantly, 51.6% of all home loans on ANZ’s book came via advisers. That is about $55 billion worth of loans.

If you consider ANZ pays advisers a 0.85% upfront commission, then that totals around $468 million paid to advisers.

ANZ chief executive Antonia Watson said the bank sees the most use of advisers in Auckland, because it's an even more complex market than everywhere else.

“As things get more complicated and it gets harder, some of the people are looking for independent buyers. Also, Kiwis are really price sensitive.

“But I think, too, part of our psyche is that we're quite nice people, so it's good to know that you can have someone else that can do the hard negotiation for you.”

Watson says the banking market is competitive, no matter what the Commerce Commission says.

She says competition is “stiff, particularly with the broker network and its reasonably high use.”

“We're constantly working with brokers as to how we can win the customer off the other bank or vice versa, or they come with an offer.

“I think that's a sign of really healthy competition.”

Supportive of reform

Watson is broadly supportive of the Government’s plans to reform the Credit Contracts and Consumer Finance Act (CCCFA).

“I think it's positive that the

prescription and affordability regulations is removed. Let the experts do what they know how to do best. I think lenders are in a good position to know, to put an affordability commonsense over things. They're the ones with the credit expertise.

“The thing that we're still really keen [on] is the penalty regime, which is in the legislation, so it's harder to change.”

She says it needs to be “made a bit more fair and proportional”.

“At the moment, for a minor

Finsure signs first big group

Fast growing adviser group Vega Mortgages is leaving NZ Financial Services Group to join Finsure.

The move is a win for Finsure and not a surprise, as Vega is aligned with real estate group Bayleys, while NZFSG is majority owned by rival group Ray White.

Vega, which has around 100 advisers, had been looking to move for some time now and had talked to other groups.

Vega founder Harry Ferreira says the move was about doing what’s best for advisers.

“In such a competitive market, we are always looking for ways to give our advisers the best possible tools to remain ahea[d of the competition.”

He says after detailed due diligence, Vega found Finsure’s technology and wide range of support services, including a dedicated credit support team, was what it needed to help achieve growth targets and take the business to the next level.

[subheader] Benefits include AI tools

Finsure NZ Country Head Jenny Campbell says the aggregator has a suite of different options for advisers, backed up by solid training and a comprehensive compliance programme.

“We also have more innovations on the way, including market-leading artificial intelligence tools.”

Campbell says Finsure’s CRM, Infinity, is one of the only ones that uses Open AI, which helps it integrate

with other software.

Finsure, like other businesses in the lending market, uses support staff based in the Philippines.

The company now has a specific New Zealand pod in Manila and the support staff are already up to speed with the New Zealand market, as many had worked with other firms which outsource to the Philippines.

Advisers can have an assistant either on a dedicated, shared or deal-by-deal basis.

[subheader] Meeting of the minds

Campbell says Vega and Finsure shared similar cultures, describing their get-together as a “mutual meeting of minds.”

Finsure Group chief executive Simon Bednar says from the first conversation with Vega, he knew the two businesses would be a good fit.

“Whilst we were confident our support services and technology will help Vega achieve its goals, it is our shared cultures that really stood out. Like Finsure, Vega prides itself on its close-knit family environment.” ✚

JENNY CAMPBELL

OPERATE UNDER THE LINK FAP

As an Authorised Body under the Link FAP you will have access to our FAP resources, audits, file reviews & compliance support.

SUPPORT FOR YOUR OWN FAP

Aggregate through us using your own FAP licence with options to utilise our systems, processes and compliance support.

BRAND

Use your own brand or use ours. (Mortgage, Insurance & Invest Link)

A SIMPLE TRANSFER PROCESS

A simple online form & streamlined process for a hassle-free transition.

BUILT IN COMPLIANCE PROCESS

LFG Advisers have access to our market leading CRM, Advice Link, providing comprehensive mortgage & insurance workflow management, automated record keeping and much more.

COMPETITIVE PRICING OPTIONS

We have competitive pricing options to suit all adviser businesses.

ACCESS TO GROUP PI SCHEME

Quality wording and very competitive pricing options

BUILD A PASSIVE INCOME

Utilise our in-house Fire & General business (FG Link) and Kiwisaver & Investment business (Invest Link) to create a passive income through referrals.

SUCCESSION PLANNING OPTIONS

Talk to us if you are looking at selling your book or looking at options to join a larger group.

People on the move

ANZ’s new adviser boss

ANZ has made an internal appointment to fill Baden Martin’s former role as head of third-party distribution.

Hayley Burgess was recently appointed to look after the important adviser channel, which generates more than half of the bank’s home loans.

Burgess has been with ANZ for nearly 20 years and has held numerous roles, including, recently, senior product manager homeowners, strategic initiatives manager home loans, and reengineering manager.

ANZ says Burgess’ experience at the bank means she “brings deep insight

and experience around home lending to the role.”

“Within Products, she has been responsible for driving home-loan momentum, including leading a focus on the mortgage-adviser channel.”

Burgess says she’s delighted to have the opportunity to lead the bank’s adviser network.

“Our relationship with our adviser network is one we value; they provide a good service for customers who prefer to use the services of a mortgage adviser.

“I look forward to continuing to work with advisers to build on the strong relationship we have with them.”

Sue Griffiths joins another non-bank lender.

Former Bluestone head of sales in New Zealand, Sue Griffiths, is joining Taurangabased First Mortgage Trust as operations manager, looking after the Tauranga, Auckland and Christchurch analyst teams.

Since being made redundant at Bluestone, Griffiths has had a role with Funding Partners as a sales and marketing consultant.

FMT’s head of lending, Sam Burgess, praised Griffiths’ extensive industry knowledge and experience.

“Sue has over three decades of

expertise in leading teams through challenging environments, positioning her perfectly for this role,” he says.

“We are excited about the valuable skills and strategic insights she will bring, which will undoubtedly enhance our lending operations and support our long-term growth objectives.”

Griffiths says she is thrilled to join the FMT team, with whom she’s been working with in the non-bank market over the past six years.

“I’m look forward to working with the team to help drive FMT's growth strategy, and to continue supporting the aggregators and mortgage advisers through ongoing education and training.”

Meanwhile, a former ANZ banker has joined the lender as business development manager in Christchurch.

George Wheelans will play a vital role in expanding FMT's presence and fostering new relationships throughout Canterbury. His extensive background in finance, lending, and portfolio management, coupled with his deep connection to the local market, will be hugely beneficial to the team, FMT says in a statement.

Sam Burgess says the expertise Wheelans and Griffiths bring to the company will be instrumental in capitalising on the significant growth opportunities First Mortgage Trust foresees ahead, as the non-bank lending industry continues to grow in New Zealand.

HAYLEY BURGESS

SUE GRIFFITHS

NZFSG adds external board member

Thérèse Singleton, currently the chief operating officer at insurance company Ando, has joined the New Zealand Financial Services Group (NZFSG) board.

The former AMP executive rounds out the board, which is made up of NZFSG executives and representatives of majority shareholder Ray White.

The other board members are former CEO Brendon Smith, Loan Market adviser Bruce Patten and Loan Market NZ CEO Brian Greer. Its Australian board members are Sam White,

Liberty appoints new South Island BDM

Liberty has added another Christchurch-based business development manager, Michelle Kinilau.

Previously a mortgage adviser in Christchurch, Kinilau has a track record of building and nurturing

The company says the diverse team "strengthens the board’s overall capability to guide NZFSG through its next phase of growth and innovation."

Singleton has held senior legal and management roles at AMP and Resolution Life. She is a current member of the NZ Financial Advice

successful professional relationships throughout a decade in banking and financial services,

“I’m passionate about helping people and forming meaningful connections - and finance has been my vehicle for achieving this purpose. I’m committed to continuing in this endeavour as I step into this new role with Liberty,” she says, adding that Liberty's commitment to inclusion resonated with her own values.

“I was drawn to Liberty through their ability to find a solution for those customers who feel stuck or may have been turned away by traditional lenders." ✚

Code Committee.

Her appointment aligns with NZFSG’s commitment to robust governance and sustainable growth, and supports the company’s mission to empower advisers, ensuring both advisers and their clients benefit from strengthened compliance, risk management, and strategic guidance.

Andrew Jamson and Ewen Stafford.

Fight to regulate property managers far from over

The coalition Government’s decision to scrap the regulation of property managers is being described as disappointing but not the end by the NZ Property Investors Federation (NZPIF) and REINZ.

REINZ chief executive Jen Baird says in an industry where a modest oneperson property management business can oversee assets totalling $60 million, it is inconceivable that such a significant sector remains unregulated.

"No other profession handling assets of this magnitude operates without oversight in New Zealand."

Nearly one in three households rent, that number will continue to increase and REINZ will not give up on the bill without a fight, she says.

“There are no minimum standards requiring residential property managers to ensure they are up to speed on landlord and tenant laws. There is no legal requirement for property managers to hold insurance. There are no checks and balances to ensure tenant bonds and landlords’ rent monies are protected in an independent trust account. Rent and bond fraud is not uncommon. Having no safeguards for client funds puts landlords and

tenants at risk,” Baird says.

Housing Minister Chris Bishop instructed the Social Services and Community Select Committee to stop work on the Residential Property Managers Bill as the previous Government’s analysis shows the costbenefit is marginal.

Baird says amidst a housing crisis, the need for landlords to have confidence in professional management of their assets is paramount.

“This, along with measures to incentivise private investment, will be pivotal to increase rental supply.”

She says equally, vulnerable tenants deserve to be protected from rogue property managers who do not always abide by the law. Concerns with bond refunds consistently rank among the top three Tenancy Tribunal disputes.

The Bill would have imposed minimum standards and protections on the sector that manages billions of dollars in assets for everyday New Zealanders.

NZPIF president, Sue Harrison says the bill would have been beneficial for the industry.

“Many members of nationwide property investor associations professionally manage properties, making it reasonable to expect financial regulation regarding the substantial rental payments flowing through managers' bank accounts.”

The federation supported the proposed licensing and regulation regime, emphasising the importance of enforceable obligations.

While the regulations would have contributed to upskilling professional property managers, Harrison says that, as with any licensing regime, there is no guarantee that trained and approved individuals will consistently demonstrate honesty and competence.

She says one of the reasons for scrapping the bill was ongoing costs, but those would have been funded by charges imposed on the regulated parties, not tenants.

“The costs would ultimately have been absorbed by owners, as property managers would need to adjust their pricing models to cover the legislation costs.”

REINZ members manage about 40% of privately managed residential housing stock, but for the other 60%, standards of professionalism and competence vary wildly. “Sadly, not all property managers act ethically,” Baird says.

REINZ and NZPIF say they will not give up the fight for minimum standards and basic protections for landlords and tenants and will continue constructive discussions with the Government and other key stakeholders.

Market could be near a tipping point

For the first time in more than three years, more people are picking interest rates will fall, rather than rise, but they are unsure whether it is a good time to buy a house.

ASB says in its latest Housing Confidence Survey, a directionless housing market, high debt servicing costs, plentiful listings, and upfront affordability constraints mean it’s far from a straightforward decision about whether to buy.

For the first time since early 2021, more respondents expect interest rates to fall, than rise.

A net 1% of respondents expect interest rates to fall – down from 15% in January 2024.

Sentiment on the rates outlook is an important guide to future price direction and can help identify turning points, Kim Mundy, ASB senior economist says.

For example, the turn in interest rate expectations in late 2020/2021 was shortly followed by the peak in house price growth at about 30% in mid2021. “We will be watching interest rate expectations closely in coming quarters.

A key difference this time around is that OCR cuts are still some way off on our forecast of February next year.

This is one of the reasons ASB is not surprised to see a decent number of

respondents expecting house prices to remain unchanged in coming quarters.

The broader economic backdrop also matters, and Mundy expects economic growth to remain anaemic and the unemployment rate to trend higher over 2024.

Neither factor is particularly supportive for housing demand.

“Nevertheless, as respondents grow more confident in their view that interest rates start falling, it’s likely to boost their enthusiasm (or ability) to transact in the market.”

Ultimately, ASB doesn’t expect to see a more pronounced lift in house prices until the RBNZ signals it will soon trim the OCR.

Alternative to first home grant

Auckland-based entrepreneur Derek Handley has set up a privately funded financial services group offering an alternative first home loan scheme.

He says he felt compelled to do this after the Government scrapped the first home loan grant.

His platform Aera is designed for first home owners to open investment accounts with the aim of saving towards a home deposit. It is offering $10,000 in credits, which can be redeemed for a first house deposit.

The savings products, which have targeted annualised returns of up to 7.15%, unlock Aera’s Deposit Credits programme giving first-home buyers a $10,000 ‘head start’ toward their first home deposit.

First-home buyers can access Aera’s head-start credits by signing up to one of Aera’s savings products, unlocking $500 upon signing up to the new plan.

Customers can then unlock credits over the course of their savings journey through hitting savings milestones and completing learning modules, up to the possible $10,000.

Handley says the government’s $10,000 first home grants made a massive difference to tens of thousands of New Zealanders, and many more would have been planning to use it in the coming years. “Our ultimate goal is to support first-home buyers into their first house irrespective of how far they are into their savings journey,” he says.

Unlike the government grants, which had regional price caps on new homes and incomes, Aera’s programme is for all first-time home buyers.

It is aiming at 5,000 accounts as a starting point. “We are rolling the full programme out over the coming months and there are a lot of developments to come,” he says.

“We want to go further than the government scheme, though, by providing savings products, education and motivation to give Kiwis the best chance at hitting their goal.”

The pilot scheme will be available to 5,000 first-home savers initially, representing a significant proportion of the yearly first home grant recipients.

Three years running is something to celebrate. Thanks to our customers, partners and teams for your trust and support.

avantifinance.co.nz

DEREK

HANDLEY

10 things to know about the mortgage market right now

10 things to know about the mortgage market right

now

EMBARGOED: 00:01 AM, Tuesday, 28 May 2024 | By

Given the scrapping of first home grants (deposit assistance) and also the strong indication fromthe latest Monetary Policy Statement that mortgage rates are set to be ‘higher for longer’, there’s bound to be a continued focus on the general property lending environment and, in particular, how easy or hard it is to access lower deposit finance. Alook at where the current landscape stands right now.

1. The slow and steady recovery in gross new lending activity continued in April. Across house purchases, bank switches, and loan top ups (equity withdrawal), total lending was $5.9bn last month, up by $1.6bn from April 2023, and the eighth rise in the past nine months, albeit from a low starting point.

2. Interest only lending is ‘under control’. Recently around 15% of lending to owner occupiers has been interest only, and 30 35% for investors. Going back to 2015 16, those figures were closer to 35% and 55% respectively. In some ways, it would appear that interest only lending has recently become more of a useful fallback position rather than the primary go to choice.

3. Average loan sizes in April were around $545,000 for investors and $555,000 for first home buyers (FHBs). Based on the median price paid by FHBs in April of $700,000 from CoreLogic data, the implication is that a typical deposit is currently in the vicinity of $145,000, or pretty close to the 20% mark.

Kelvin Davison, Chief Property Economist

Given the scrapping of first home grants (deposit assistance) and also the strong the latest Monetary Policy Statement that mortgage rates are set to be ‘higher bound to be a continued focus on the general property lending environment how easy or hard it is to access lower deposit finance. Let’s take a look at where landscape stands right now.

BY KELVIN DAVIDSON, CORELOGIC

1. The slow and steady recovery in gross new lending activity continued in April. Across house switches, and loan top-ups (equity withdrawal), total lending was $5.9bn last month, up by and the eighth rise in the past nine months, albeit from a low starting point.

4. But many FHBs continue to access the market with <20% deposits. Compared to the 15% speed limit allowance for banks to lend to owner occupiers with less than a 20% deposit, only 9% in April actually went out in that bracket (although banks’ tendency to keep a 5% buffer, means the ‘real’ speed limit is probably 10%). In turn, as Figure 1 below shows, within that 9%, about four fifths (orange line) actually went to FHBs, and put another way, around one third

2. Interest-only lending is ‘under control’. Recently around 15% of lending to owner-occupiers only, and 30-35% for investors. Going back to 2015-16, those figures were closer to 35% and some ways, it would appear that interest-only lending has recently become more of a useful rather than the primary go-to choice.

(blue line) of FHBs have recently been getting mortgages with less than a 20% deposit. This has been a key support for FHBs’ ability to buy.

3. Average loan sizes in April were around $545,000 for investors and $555,000 for first home Based on the median price paid by FHBs in April of $700,000 from CoreLogic data, the implication deposit is currently in the vicinity of $145,000, or pretty close to the 20% mark.

4. But many FHBs continue to access the market with <20% deposits. Compared to the 15% for banks to lend to owner-occupiers with less than a 20% deposit, only 9% in April actually bracket (although banks’ tendency to keep a 5% buffer, means the ‘real’ speed limit is probably Figure 1 below shows, within that 9%, about four-fifths (orange line) actually went to FHBs, around one-third (blue line) of FHBs have recently been getting mortgages with less than been a key support for FHBs’ ability to buy.

5. The likely loosening of the LVR rules should continue to assist FHBs. Given that the low deposit lending speed limit is likely to rise from 15% to 20% over the next few months, FHBs should continue to have reasonable access to the market, provided of course that they

5. The likely loosening of the LVR rules should continue to assist FHBs. Given that the low deposit limit is likely to rise from 15% to 20% over the next few months, FHBs should continue to have the market, provided of course that they can meet the serviceability testing requirements.

Figure 1. High LVR first home buyer lending (Source: RBNZ)

Figure 2. Breakdown of existing mortgages by time to next repricing (Source: RBNZ)

can meet the serviceability testing requirements.

For media enquiries, please contact nzmedia@corelogic.com 2 © 2024 CoreLogic, Inc. All Rights Reserved.

6. Investors stand to benefit from looser LVRs too. Soon five percent of new lending is set to be allowed at less than a 30% deposit, an easing from the current 35% deposit requirement. At present, essentially no investor lending to purchase existing properties is taking place in the 30 35% deposit bracket. Clearly, the change in the rules would pen this up, and also allow existing investors to free up some more equity from the rest of their portfolio too. Of course, low rental yields and high mortgage rates (hence large cashflow top ups) will remain key challenges for investors looking at purchasing more properties for a while.

7. Debt to income limits are a big deal. Given that mortgage rates remain high, the size of loans being approved lately has naturally been lower than before in relation to borrowers’ income less than 10% of lending was done at a high DTI for both first

home buyers and investors over the first few months of 2024. But even though the likely near term introduction of formal caps on DTIs might not do much straightaway, make no mistake, the new rules will mark a big landscape shift as mortgage rates decline primarily by slowing down the rate at which property investors can grow a portfolio, especially in more expensive areas.

8. The process to reprice existing loans to current mortgage rates isn’t finished just yet. In Figure 2, the latest data shows 60% of existing mortgages (by value) are fixed but due to reprice to a new mortgage rate within the next 12 months. Now, some of those loans won’t see much of a change. But others could easily see their mortgage rate go up by 0.5% to 1%, maybe more indeed the Reserve Bank estimated in their latest Financial Stability Report that around 20% of borrowers still have debt at a rate 5% or less.

9. Job losses are a clear risk to the smooth repricing process so far. Not only are some borrowers yet to hit market rates, but the labour market is now softening too, with some job cuts coming through. That will tend to drive more repayment stress, non performing loans, and possibly mortgagee sales. But the context is also important; the Reserve Bank is still projecting a higher unemployment rate mostly due to a bigger labour force (not mass job losses), and those measures of stress in the housing market are starting from very low levels.

10. There are many people with a lot of housing equity. Finally, it’s worth remembering that many people don’t have a mortgage and there’s a big equity buffer out there. CoreLogic estimates show the housing stock is currently worth $1.63trn, while RBNZ data shows a mortgage stock of $358bn, implying an overall LVR of only 22% or so. ✚

QUESTIONS THE COMCOM IS ASKING ABOUT ADVISERS

The Commerce Commission recently held a three-day conference discussing submissions to its draft report into competition in the banking sector. On the final day, it devoted an hour to discussing mortgage advisers.

Advisers have been highly critical of the draft report, with their key message being that the regulator does not understand how third-party distribution works.

Commission chairman John Small opened the session by acknowledging that the industry had “expressed a number of concerns.”

This had led to the commission engaging with mortgage advisers and the two associations which represented them.

Consequently, “Our original thinking has shifted and some of our original concerns have fallen away, but we can see scope for changes in a number of areas which would improve competition and outcomes for consumers,” he said.

During the conference session, the commission asked a series of questions around mortgage advice.

It’s first query: should New Zealand follow Australia and make mortgage advisers disclose which lenders they do not deal with – a concept called negative disclosure.

Interestingly, commission staff made the comment that some dealer groups worked only with a few lenders. Looking across the market, the only

obvious candidate it could be referring to here is New Zealand Home Loans. NZHL is a key distribution channel for Kiwibank, but also uses a couple of non-bank lenders.

To its credit, NZHL does not describe itself as a mortgage adviser as its proposition is debt repayment, coaching clients how to pay down debt quickly to lower their overall interest costs.

Small suggested having broad panels of lenders was good for promoting competition.

At this point, he noted there had been reports that accreditation with Kiwibank was “difficult to get”, creating “somewhat of a handbrake” for competition.

A Kiwibank representative explained its position, saying it had been slow to embrace mortgage advisers but was now running hard to onboard them.

The spokesman said the bank onboarded 479 advisers in the past 12 months and its flows from third party were on par with the four big banks.

Negative disclosure

The Australian Securities and Investments Commission (ASIC) requires mortgage advisers to disclose

which lenders they did not deal with.

Mortgage adviser Sarah Curtis spoke in favour of this practice of "negative disclosure".

“It is something we would be completely comfortable with,” she said.

Leigh Hodgetts, country manager for the newly formed Finance and Mortgage Advisers Association of New Zealand, said she had worked in Australia before coming to New Zealand 13 years ago and that she “would hate us to go down that road.”

She described ASIC's rules as “very prescribed and over-prescriptive”.

“You're trying to fix something that I don't see as broken at all.”

Other speakers noted that there were about 40 lenders in New Zealand, but that most lending was done by the five largest banks.

Overall, advisers who spoke to this question were not in favour of negative disclosure.

Focus of competition

Small said the commission had been surprised that interest rates and pricing didn’t appear to be the focal point of competition for mortgage advisers.

That “strikes us as unusual for a

service that's all about comparing rates and pricing,” he said.

Small asked whether New Zealand should embrace the ASIC approach and strengthen the focus on interest rates.

Consumers had told the commission that rates were important and an element in switching.

Mortgage adviser Patricia Marsden, along with several other advisers, noted that while the conversation with a client may begin with interest rates, pricing between the banks was usually much the same – and that the banks moved quickly to match sharp new offers from a competitor.

“Once you've shown that to a client, it takes rates out of the equation.”

Adviser Hamish Patel, who is also chairman of the Financial Advice NZ mortgage member advisory committee, said that the Credit Contracts and Consumer Finance Act could complicate matters – as could time constraints, such as a client needing to refix within two weeks.

Mortgages advisers usually operated in small businesses, Patel said.

“We're in competition with each other. The free market drives us,” he said, noting that a client could walk out of a deal at any point before settlement,

‘Should New Zealand follow Australia and make mortgage advisers disclose which lenders they do not deal with?’ Commerce Commission

which meant the adviser got paid nothing, so it wasn’t in an adviser's interests to do anything but try to get the best interest rate.

Sarah Curtis said that advisers knew what the rates in the market were and could look for banks to match any particular rate.

A number of advisers noted that other factors could be more important or more suitable to a particular client and that sometimes it was lenders’ non-interest policies which determined where a particular loan would be best placed.

Claw back clawbacks

Advisers told the Commerce Commission that clawback periods of mortgage advisers' commissions should be much shorter and more in line with Australian practices.

Commission chairman John Small described the issue as “noisy”, saying it was the subject of a number of complaints lodged with disputeresolution services.

While some bankers at the hearing said they wouldn't enforce clawback provisions if a customer repaid a loan early because they received some unexpected lump sum such as an

inheritance, adviser Patricia Marsden challenged that stance.

Her experience was that banks in New Zealand considered four years to be “short-term”, when in Australia the period was more like six to 12 months.

A lot of things could change within four years, from inheritances or death to matrimonial problems - any of which could mean that “having that loan may not be in their best interests,” she said.

But if the adviser was facing a clawback in such a situation, they could be “compromised” in advising the client.

Small said the commission was concerned that some lenders didn’t warn advisers when a customer switched to another adviser or repaid a loan early.

BNZ chief executive Dan Huggins said that “it would be very challenging” for his bank to warn advisers in such situations.

Mortgage adviser Jeff Royle told the commission of a case in which one of his clients had been told in writing by a bank that she would incur no charge from repaying a loan early, but ended up receiving a bill for $5,500 for doing so - a sum which included a commission clawback. ✚

A new way to eat a home

Home equity release has been described as a way the elderly can ‘eat’ some of the equity in their houses – enabling pensionsers to get by while still living in their homes. Now there’s a new way to do it.

Jenny Ruth investigates.

Elderly homeowners who are asset-rich but incomepoor now have a new way to maintain a reasonable standard of living while continuing to live in their homes.

Debt-based reverse mortgages have been available for years to those aged 60 or more: Heartland Bank is the main provider in New Zealand, with SBS Bank also offering them.

Generally, the existing reversemortgage products offer lump sums, although they can be drawn down gradually to finance everyday expenses.

But Lifetime Retirement Income now has a new product, dubbed ‘Lifetime Home’, which allows seniors over 70 to sell some of the equity in their homes and convert it to a supply of regular income to supplement superannuation. It’s the first time a debt-free equityrelease option has been available in New Zealand.

All three companies offering these variations of equity-release products provide their customers with a guarantee that they will never be turfed out of their homes, but the reverse mortgage arrangements may take all their equity.

The two reverse-mortgage offerings come with a guarantee that customers' liability will never exceed the value of their house – but, because no repayments are required until the home-owner either dies or sells their home, interest on the amount they borrow does continue to compound, meaning the person has no idea what their ultimate liability will be, and

hence how much of their equity will be eroded.

The new option

Lifetime's new ‘debt-free’ equityrelease option guarantees its customers will always own at least 65% of their homes.

Essentially, once a valuation is agreed upon, Lifetime buys some of the equity in a person’s home, typically 35%.

The ‘purchase price’ is discounted, in exchange for then paying the homeowner a fortnightly income to supplement superannuation.

Needed: income off the house

Economist Cameron Bagrie, an independent committee member of Lifetime's board, crunched the numbers and found about 60% of retirees depended largely or entirely on income from the Government's New Zealand Super. An estimated 80% currently owned their own homes.

For many, the home was their only asset, although some were still repaying a mortgage when they retire.

In 2021, household net worth statistics showed those aged over 65 still held about $6.5 billion in home loans - on houses worth $185 billion - and that their home accounted for about 25% of their total net worth.

The median net worth in 2021 of individuals aged between 65 and 74 was $454,000, while those aged 75 or more had a lower median net worth of

$414,000.

Bagrie says the decline in net worth over time reflects people running down their assets to fund their retirement - and possibly intergenerational transfers, such as assisting children to buy their own homes.

Superannuitants have faced a higher effective rate of inflation between 2008 and 2022 of 2.4% a year, compared with 2.1% for the general population, and Bagrie expects that to continue, especially since rates and insurance costs continue to rise faster than general inflation.

The Massey University Retirement Expenditure Guidelines, published in October last year, found that a couple living in a metro area with a “no frills” lifestyle with few, if any, luxuries, needed $982.02 a week to survive when the weekly rate of their New Zealand Super was only $763.64 (it has risen since with the latest cost of living adjustment, but so have costs).

Clearly, they would need at least an extra $218.38 of income from other sources each week to make ends meet.

“Most New Zealanders aspire to a better standard of living in retirement than can be supported by New Zealand Superannuation alone,” the Massey report notes.

Bagrie points to Retirement Commission work showing 40% of those aged 65 or more have virtually no other income other than superannuation, and that another 20% have only a little more additional income.

‘40% of those aged 65 or more have virtually no other income other than superannuation’

– Retirement Commission

A more comfortable retirement

Clearly, something has to fill the breach, and that's what the new Lifetime product is designed to address.

“These products, if they're used well and sustainably, can give people a more comfortable retirement,” Bagrie says, adding that there will always be pros and cons.

“Any product like this carries a cost –there's no free lunch,” he says.

“Where I get frustrated is people don't acknowledge the reality for many retirees.”

But reality also presents an opportunity: the rapid growth in house prices means many are sitting on a lot of equity.

Bagrie believes younger people, who are used to having to take on debt, are likely to be more receptive to such products when they're older and less likely to be worried about their children's inheritance.

“I don't think they're going to be afraid of these products.”

Presenting details of the new product at the TMM Better Business conference in February, Lifetime told advisers that their purpose was “to help people enjoy their retirement with the security of an income for life.”

The company estimates that in 15 years’ time, the number of people in

estimated there were about 842,000 people in that age bracket.

Lifetime already offers annuitystyle income products. Founder and managing director Ralph Stewart told TMM that workshops around the country had shown both those with reverse mortgages and those without didn't like the uncertainty of not knowing how much equity they'd be able to retain.

Stewart doesn't see his company as directly competing with traditional reverse-mortgage offerings, which he said are probably a better option for those seeking a lump sum. Lifetime's option, he says, is more suitable for those seeking income.

He says his company's product has had a long gestation period and is modelled on the Australian Homesafe company's wealth release product.

The onboarding process for a customer may take up to six months, and the customer will have to obtain independent legal advice, as with reverse mortgages, as well as ensuring family members are aware of what's happening, Stewart says.

What’s in it for advisers

The specialist nature of the new debt-free product means there's little work for mortgage advisers in the process; the same is true with reverse mortgages, although all three companies will pay advisers a referral fee: $1,250 from Lifetime, $1,200 from Heartland and $1,000 from SBS.

Lifetime had been planning to pay a lower $500 referral fee, but Stewart says when they turned up to the TMM conference, they learned Heartland had raised its fee so Lifetime chose to match it.

Heartland's retail and reverse mortgages general manager,

Keira Billott, says the change in referral fee had nothing to do with Lifetime's advent.

“It was changed last year because it had been a while since we last reviewed it,” Billott says, adding that referrals from brokers currently make only a small contribution to selling reverse mortgages.

One reason for “enhancing the broker proposition” has been the opportunity to educate advisers and to raise their awareness and understanding of the product, she says.

Heartland has made no other changes to its reverse mortgages since it became aware of Lifetime's plans, Billott says, describing the latter as “something we've heard about and acknowledged, but it's not something we've reacted to in any way.”

While both Heartland and SBS Bank allow their reverse-mortgage customers to ringfence a portion of their equity, that amount will be excluded from calculating the maximum amount they can borrow.

Demand growing

Heartland's numbers demonstrate that there's significant and growing demand for its reversemortgage product.

Its New Zealand portfolio grew 18.7% to $972 million between June and December last year, and has been growing at a compounded annual rate of 16.7% since July 2018.

Meanwhile SBS managing director Mark McLean said his bank's product is growing at just under 10% a year currently, compared with total credit system growth of 3.5% to 4% a year.

However, SBS's mainstream mortgage portfolio is growing faster at about 13% and reverse mortgages total about $90

‘Any product like this carries a cost… Where I get frustrated is people don't acknowledge the reality for many retirees’

‘[Reverse mortgages] take more time. You're meeting face-to-face or via conferencing with borrowers to make sure it's fully explained’

– Mark McLean

million out of total residential property lending of $4.2 billion at Sept 30 last year.

There's no doubt that the current high-interest-rate environment means the amount of equity of reversemortgage holders is being eroded significantly faster than at any time since the global financial crisis. Reverse mortgage products only work with floating rates – given their indeterminate longevity, it makes no sense for the vendors to offer fixed rates – and floating rates offered by the major banks averaged just below 6% between 2008 and 2020, until the onset of the covid pandemic when they sank below 5%.

However, Heartland's rate now is 9.98%, while SBS's is 9.95% - significantly above the floating rates of the big four banks, which range from 8.64% to 8.74%.

How much can you borrow

The amount people can borrow on reverse mortgages is strictly limited according to age and the valuation of their home.

Heartland, for example, will lend only up to 20% of the value of the home of a 60-year old, but will lend up to 40% on the home of an 80-year old.

SBS's limits are lower – it allows an 80-year old to borrow up to a maximum of 30% of the value of their home.

At December 31, Heartland's average loan-to-valuation ratio (LVR) at origination was just 9.6% but the current average LVR was 22.8%.

The average loan size was $135,139 and the weighted average age of borrowers was 78.

Borrowers can repay reverse

mortgages at any time, and Heartland's repayments of $58 million in the six months ended December were up $7 million on the previous first half.

That was far outweighed by new originations of $96 million, although that was down $13 million on the previous first half.

The main reason Heartland's borrowers have given for using a reverse mortgage is to make alterations to their homes, making them more aged-friendly, while some of those still repaying a mortgage have swapped to Heartland's product so they don't have to continue making payments.

Big banks not going there

While ASB and Westpac have dabbled in reverse mortgages in the past, none of the four major banks nor Kiwibank now offers them - and much the same has happened in Australia, where the major banks have abandoned the field and Heartland is now the clear market leader.

Best guesses as to why the major banks have bowed out include the fact that reverse mortgages are much more complicated than ordinary mortgages.

The majors have followed the path of least resistance, offering only the traditional product and avoiding the risk of reputational risk: the potential negative headlines, possibly from adult children learning their expected inheritance is either much smaller or has vanished altogether, are all too easy to imagine.

The major banks' increasing reliance on mortgage advisers, who now write well over 50% of the major banks' traditional mortgages, also shows the

banks' decreasing appetite for the hard work of originating mortgages, let alone the much more complicated and time-consuming task of writing reverse mortgages.

SBS’s McLean says that perhaps the limited size of the opportunity, especially compared with other segments of the market, makes reverse mortgages less attractive to his major competitors.

“It takes more time. You're meeting face-to-face or via conferencing with borrowers to make sure it's fully explained and to ensure they get independent legal advice,” he says.

“We encourage them to speak to their family so there are no surprises. I think it's a very good product to have in the market for people who want to maintain their lifestyle.”

But it isn't for everyone.

“When they work through it, some people will decide no,” McLean says.

Heartland's Billott says her bank's aim is to “ensure the customer is in the best situation possible” and that it has “a really robust application and onboarding process to make sure they're fully informed.”

Her bank has more than 23,600 customers in New Zealand and she says people will now have “a big opportunity” with Lifetime's product “bringing something else to the picture.”

But it also highlights the limits of what the Government is offering older people.

Billott suggests there needs to be “much bigger conversation about how New Zealand can support retirees.” ✚

›

consolidate

› Want to restructure

and more.

or consumer lending for home lending purposes.

› Are

› And more…

machinery etc

Taking care of the detail: A simple introduction from you, and our team of 20+ financial advisers take it from there.

Keeping you informed: The better finance™ Adviser Portal delivers real-time access to track loan progress, check settlements, commissions and more.

Offering strong commercial terms: Give the

Patel runs his own business, Mortgagesonline, but is also the chairman of Financial Advice NZ’s mortgage member advisory group.

It’s now just over a year since the full, new, advisory-industry regulations came into force.

While it was a big ask for many, especially getting Level 5 qualifications, all things considered, it has gone well. Patel says.

“Overall, it’s been pretty good.

“The industry has matured and a lot of technology makes it doable,” he says. He even goes as far as to suggest that “maybe the consumer is getting a better service from the industry.”

With his own business, he says he has had to change things “quite a bit”. But he reckons the changes have helped enhance how he gives advice - particularly around the structure of loans.

Technology is my saviour

Auckland-based mortgage adviser Hamish Patel joins Philip Macalister on the TMM Better Business Podcast series to discuss trends and issues facing advisers.

His business is quite technologyfocused and he uses a lot of audio notes.

“That’s been my saviour.”

Artificial Intelligence is “making our jobs easier”, he says, but it will not replace advisers.

“A lot of my clients want human reassurance,” he says. “They want to know they are doing the right thing. You need a human to do that.”

The areas in which he uses AI include transcribing recorded conversations, moving data from one PDF to another, and searching bank manuals. With the latter, Adobe Acrobat has an AI tool which can be used to search bank manuals and policies.

While AI is in its infancy, Patel is certain it will be a useful tool for mortgage advisers.

Random FMA visits

The Financial Markets Authority has been conducting monitoring visits across the financial advice sector and is

due to produce a report soon.

Patel tells TMM’s Better Business Podcast that he hasn’t had a visit yet personally, but has talked to others who have had the FMA knocking on their door.

These visits can be generated from complaints or an adviser can be “randomly” selected.

Patel says the “random” visits are lighter, shorter, sharper and to the point.

They seek to find evidence that advisers are following processes, he says.

It’s not so much the solution which is being examined but the processes. ✚

The Podcast can be found on tmmonline.nz and is available on your favourite streaming platforms including Spotify, Google Podcasts, Apple, Iheartradio and SoundCloud. If you are a lender and would like to appear on TMM’s Better Business Podcast please email philip@tmmonline.nz

CCCFA changes could remove personal liability on directors & senior managers

The changes the Government is considering making to the Credit Contracts and Consumer Finance Act (CCCFA) aren't the things that have been making headlines, such as coffee and Netflix habits disqualifying borrowers from getting mortgages.

Instead, the focus is on whether directors and senior managers of financial institutions should be able to be indemnified, or to insure against penalties for breaching their due diligence duty, and whether disclosure obligations and penalties for their breaches are fit for purpose.

The Government is also looking at effectively reducing penalties on financial institutions which don't provide required disclosure or provide inaccurate disclosure to borrowers –and considering lowering the threshold for the high-cost credit provisions.

Currently, the law captures lending with interest rates of 50% and above; the Government is looking at lowering that to 30%.

While interest rates generally are currently regarded as high, the Reserve Bank's official cash rate is 5.5% and mainstream floating mortgage rates are below 9%.

A discussion paper on the proposed changes, released by the Ministry of Business, Innovation and Employment (MBIE), notes that directors and senior managers currently can't be either indemnified by their companies or covered by insurance for breaches of their due diligence liability.

In other words, directors and senior officers are currently personally liable if they breach their due diligence duty.

“Highly

conservative”

“While these settings were intended to increase accountability for directors and senior managers, we have also seen signs of them causing lenders to take highly conservative interpretations to

requirements relating to affordability and a reluctance to exercise discretion as intended,” MBIE's paper says. It notes that “some larger lenders” have argued that they are disproportionately affected because their directors and senior managers have less control over the activities of employees.

The proposed changes to disclosure requirements cover removing duplication, removing information “unhelpful or unlikely to ever assist borrowers to reach informed decisions,” and removing the potential for confusing consumers or overwhelming them with information.

One possibility is to remove the requirement on a lender to make disclosure before they embark on debt collection, because this is “perceived by some lenders as causing borrowers further distress or confusion.”

The CCCFA currently provides that lenders forfeit the right to any interest or charges for any period in which disclosure is not properly made. ✚

Jill

of all

trades, master of one

Jenny Aitken has worn many job titles, including entrepreneur, banker, saleswoman and nanny, but “everything

clicked” once she entered the world of advice.

BY SALLY LINDSAY

Walking through the door to her first advisory job in 2013, Jenny Aitken felt like she’d come full circle.

She had started her working life at Westpac, back in the days of cheques and batching, but since then had completed a BA in media and spent time in myriad industries: from beauty therapy at Ballantynes, Christchurch’s poshest department store, to nannying in London, personal assistant to an accountant, and a job in media sales.

In the leadup to 2013, she had founded Hue, a chain of hair salons which focused on colour not cuts, with a grant from New Zealand Trade & Enterprise. After selling her salon shares, and feeling at a loose end, Aitken says a recruiter suggested entering the world of mortgage advice at New Zealand Home Loans.

“I thought, ‘I’ve done all this and you’re taking me right back to the start’. [But] I didn’t have anything else on the horizon, so I started with them and never looked back after that.”

Aitken says NZHL had a robust and thorough training system, with experts in the mortgage space.

“It was a good grounding and gave me an excellent understanding of what mortgage advising was about.”

At the time there was access to only two banks – Sovereign (now AIA) and Kiwibank.

“Only two different ways of doing mortgages,” she muses. “In hindsight, it was an excellent training space.”

What were the first things you learned that you still carry out today?

Listening. I have always listened, but I am much better at it now.

When someone wants to talk about mortgages, I can filter out peripheral information easily, such as marriage breakdowns, and can generally guess where people are going with the conversation.

Good listening skills mean you find out a lot more, a lot quicker. I have had clients come to me after consulting other advisers, who have missed important pieces of information because they haven’t listened thoroughly enough - and then haven’t been able to ask the right questions.

The other thing I did right from day one, and still do, is multi-tasking. In terms of mortgages and people, there are always things in play – people enquiring, people waiting for approvals, approvals with conditions, people buying properties – and you have to be able to flip between the different scenarios at the same pace.

You can't just focus on one person or a group of clients. You have to be quite nimble in how you navigate each individual or group.

In the end it comes down to business and how successful you want it to be. All mortgage advisers are running their own businesses.

Even if they're working under a firm, they still get paid commission generally, so you have to always look at your pipeline and what's coming in, not only what's settling. I’ve always done that.

When did you set up on your own?

In 2016, I formed Jenny Atiken Mortgages: JAM. I decided since I was paying 30% of my commission to the

‘To new advisers, I say don't just keep hunting for the next deal, just actually give people time - and keep asking questions’’

company, I would be better off on my own.

It wasn’t easy, but there was a lot less compliance then than there is now. I also found people buy your skills as an adviser, not those of a company.

Where do you find opportunities?

When I asked the person training me the same question, she said, “After three years, they just come through the door”. And I remember thinking, ‘Gosh, that would be nice’.

In a way, it has worked out like that. The majority of my business is word of mouth. People might Google me, find me, check my reviews and then make contact.

I've also always been a big participant of networking groups. I'm in four different networking groups, and that's been invaluable.

It's not just about the leads. You get really good contacts, get a real sense of where the market is at, what people are thinking, what's going on - and it's a nice anchor point of the week when you work for yourself.

Does networking generate a lot of leads?

It does. You establish good rapport with the people in the groups. They know you, you know them, and it works really well.

It wasn't intentional, but it's turned out to be a core part of my lead generation.

Some years stand out for mortgage advisers – what has this past year been like?

For me, it's been the year of trading up: people selling their existing home and buying a bigger and better property. I have had more of that than I've had previously.

There have been hiccups. Invariably, people find the home they love, before

they've sold the one they've got. So it's that tension between being able to sell and buy.

But a lot of people can't grasp the concept that while they're not getting the best price they'd like on the home they live in, the next property is significantly more discounted if it's more expensive.

They can’t get their head around the fact they might lose $100,000 on the place they’re selling, but save $200,000 on the one they're buying. That's how it works, and it’s a great opportunity in the market as it is now.

There's been a lot of industry change in the past two to three years. Has it been onerous?

An entire industry around compliance has sprung up, selfgenerating in its own importance. I feel fortunate that I've been an adviser for as long as I have.

It's just another thing to add on, but it's added cost and time. I'm doing my business the same now as I was before, but there's more rigorous control in the space.

For new advisers coming into the industry, it is onerous, but it will settle down.

What is the one piece of advice that you would give to someone starting out in the industry now?

When encountering a potential client, keep asking questions. I can't tell you the number of times I have had new business, and the person may have said to me, “I've spoken to a couple of advisers”, and those previous conversations have missed some key points.

Someone might not have a particularly large deposit, you chat away to them, and they'll casually say “Oh, Mum and Dad said they'd give me some money towards my house”, or I'm working with some clients and they've been through two other mortgage advisers who just dismissed them.

A little bit more digging and you might be able to determine that they qualify for a substantial non-bank loan that is doable.

So to new advisers, I say don't just keep hunting for the next deal, just actually give people time - and keep asking questions.

And as quite often happens, clients you have given advice to, but weren’t

in a position to do anything, may either come back down the line, or send someone else to you. You never know where your business is going to come from.

What advice would you give to yourself if you were starting out now?

Systems are key in how you run your business: how you store your data, how you set up your processes.

I would probably have had more structure in place, so that it was easier to scale. And I would also have researched aggregators quite thoroughly.

It is not an easy process to switch aggregators especially when you've got a lot of data. You want to ensure that you've made a considered choice when you sign up with an aggregator, and have strong systems in place about how you will operate your business.

What are the biggest issues facing the industry?

Something that isn't helping us is the public voice.

Commerce Commission chairman John Small’s comments about advisers being paid commissions by banks being a conflict was deeply ill informed. It was so surprising that someone in such a public-facing, high-ranking role would put out something that they had no knowledge of, had the facts wrong and didn’t consult the industry.

And the industry jumped really quickly on that and facilitated a lot of conversations. For some reason people seem to resent that advisers are paid commission.

The other big issue is the disputes process and clawbacks.

Borrowers using mortgage advisers clearly sign paperwork informing them they may be charged a fee if the adviser is charged a clawback fee if their mortgage is repaid early, but they can still lodge a complaint at the disputesresolution service, which costs the adviser money, and doesn't cost the complainant anything.

And the disputes-resolution-service people appear to reinvent the wheel in terms of understanding how the mortgage process works.

It's pretty weighted against the adviser. It doesn't seem a reasonable process. ✚

JennyAitken

From

My father was in banking, so we moved around. I was born in Christchurch, grew up in Wellington, lived in Greymouth, finally Christchurch, and then I went overseas.

Family

I'm not married. I never had an offer I couldn't refuse. So, I have parents in Auckland, a daughter, 26, in Sydney, and I have brothers and cousins and family in Christchurch.

Outside Work

I started at the gym this year, so probably gym and work, and I have a few British shorthair cats and dogs at home that take up my time.

TV show

My favourite is a series called Mister Inbetween

Favourite book

Eleanor Oliphant is Completely

Fine written by Gail Honeyman

Favourite music

Folk and country

Motto

Love many, trust few, and always paddle your own canoe

LOWER YOUR CLIENTS' STRESS LEVELS

You’re a mortgage adviser, not a counsellor or psychologist, but when your client is facing financial stress, it’s worth remembering: he or she is human, with very real feelings - and you can help.

BY PAUL WATKINS

There’s a famous saying from poet and civil rights activist Maya Angelou: “I’ve learned that people will forget what you said, people will forget what you did, but people will never forget how you made them feel.”

It’s likely that many of your clients are facing financial stress - due to their mortgages having been refixed recently or the fact they’re about to be. In a lot of cases, the interest rate will double.

Let’s add in the recession we’re in, businesses closing, inflation stubbornly remaining, housing sales slow in many places with prices soft, and government workers being laid off. Not the ideal market for anyone, be it seller, buyer or broker.

Is there any way you can alleviate their stress? Yes. And in addressing this challenge, mortgage advisers should not only provide financial solutions but also offer compassion, understanding and practical advice to help clients navigate this disquieting period.

Some of these ideas may not be things you wish to provide yourself, so find others to whom you can refer them.

Knowledge reduces anxiety

Education and explanation are a core part of mitigating client anxiety. The easiest way is to make short regular videos which explain challenges and, if possible, provide some answers.

By ‘short’ I mean just two minutes or so, and by ‘regular’, I mean weekly.

Send these out as a link to your blog page. You can’t change the economy or make big changes to the interest rates, but you can give clients tips and hints on how to cope.

Just on the topic of blogs: I do hope you have a blog page on your website. If not, start one! It’s a powerful and free way to raise the search results.

Have each blog post transcribed into text as well, as videos alone won’t help you rank. (Out of interest I just checked half a dozen adviser websites and

‘Referrals are 90% based on whether they like you, not what you did’

only one had a blog. Come on people, it works!)

No idea what to make videos about? The first step is to make a list of the 20 most common questions clients ask you.

These become the start of your topics, added to which can be others as I have outlined below.

Now practice holding your phone up to your face and speaking. Warts and all, that’s all that’s needed: casual, genuine, sincere, and being a real person – just like your clients. Do not get carried away with

production costs, apart from some simple editing and branding, which should cost you almost nothing. These can also become social media posts, of course.

Some of the topics will blatantly reinforce your value as a broker, while others are simply trust builders. This transparency will help clients prepare mentally and financially for the changes ahead, which will be considerable for many.

A key topic is personal financial strategies. I know most of you have no interest in being budget advisers, but there are dedicated financial planners and money coaches in most cities and towns.

Form relationships with them; run Q&A sessions together; link to each other’s websites and interview each other on your podcasts if you do one. What kind of information will alleviate client stress?

From my own anecdotal research with people who are in this position, along with some AI tools (embrace AI, people, it ain’t going away – and, no, it won’t replace you just yet), the topics below showed up as the best information to help overcome anxiety around mortgages:

1. Loan structure – and adviser negotiating power Refinancing and loan restructuring options are obvious

‘Your role must move beyond financial advice to include empathy, education, and emotional support’

topics, but, along with these, you can explain how advisers have negotiating strength. You may be able to work creatively on solutions with lenders on their behalf, as the lender does not want the client to falter in his or her repayments any more than the client wants to. And few clients will have the knowledge or be in the frame of mind to do the negotiations themselves.

2. Budget advice

The information already mentioned is budget advice: ways to reduce living costs to allow for the new payments looming. Most people live to their incomes, so it’s always possible to find savings - but, as I said before, find someone else to do this for your clients, as it’s not your core strength.

3. Debt management

A logical part of reducing living costs is overall debt management. You should be able to talk to this, along with potential lender red flags with little effort at all, since it’s what you do.

4. Mental health

Don’t ignore overall ‘mental wellness’, which has become a big thing now. We live stressed lives, worrying about the security of our employment and paying unexpected bills. Once

again, form a relationship with someone who can help in this regard. Refer clients to podcasts, webinars and online resources. If clients are in an emotional or psychologically challenging state, they can’t make logical decisions.

Since your services will put clients in the most debt they will ever be in, put yourself in their shoes. How are they thinking? What is stressing them out? What are their pain points? What options do they have?

I am not offering anything new here. You know these topics backwards, but it’s all in your brain and not inside the stressed, worried clients’ minds. So, share these thoughts.

Move beyond financial advice

In conclusion, as mortgage advisers, your job is to navigate your clients through the challenges of refinancing in a higher-interest-rate environment. So, your role must move beyond financial advice to include empathy, education, and emotional support.

No, you are not a counsellor or psychologist, but they are humans with real feelings.

The longer-term bonus from all of this is that they will see you as the hero and recommend you to others.

Referrals are 90% based on whether they like you, not what you did. And like Maya Angelou said, despite the best

mortgage rates you can get for them, arranged in the perfect structure, those are just hygiene factors. It’s how you made them feel that matters.

Otherwise, bringing up a recuring theme of mine, what value do you add to the experience?

How to use AI

As a final note, I referred to AI earlier. Right now, its best use is to assist in your marketing. ChatGPT is the most well-known of the AI tools, but it’s one of more than a thousand now.

I asked ChatGPT to give me ways AI can help market mortgage brokerages. It came up with the following:

Generating marketing copy, blog posts, and content ideas; SEO (search engine optimisation) and content optimisation: suggesting improvements and keyword opportunities to rank higher; customer insights and personalisation; predictive analytics; customer segmentation; chatbots; email marketing txt and performance; social media and sentiment analysis; social listening tools; advertising and media buying; optimising ad-buying decisions in real time; targeting the most relevant audience at the optimal time and price; AI image generators; voice search and smart assistants; market research and competitive analysis; market trends and competitive strategies. It’s a big list! ✚

Paul Watkins is a marketing adviser to the financial services industry

PAUL WATKINS

The Negative Pledge

Whether or not to break the negative pledge; That is the question that Sanderson Weir director Lee Kerr answers.

BY LEE KERR

We see many situations where the bank is unwilling to extend further credit and a second mortgage loan is the get out of jail free card the client needs. However, a second mortgage will inevitably run up against the negative pledge.

The negative pledge is a term within most loan and mortgage contracts where a borrower covenants that it will not grant a mortgage or interest to any other lender without first gaining the bank’s consent.

Sanderson Weir act for numerous lenders around the country, including banks and non-bank lenders on both first and second mortgage loans. We are often surprised by solicitors’ interpretation of both the negative pledge and their professional obligations to their client borrower.

This article explores some of the issues for a borrower considering a second mortgage vis-a vis the negative pledge it gave the bank. The client does need frank advice before making this decision and an adviser can be of great assistance.

Breach of Negative Pledge

It is the granting of a security interest to a subsequent lender (without consent) that will be a breach of the negative pledge - nothing more.

Simply signing a loan agreement that grants a mortgage interest to a subsequent lender is a breach of the

negative pledge, regardless of whether a mortgage or caveat is registered on the title. Therefore, a borrower needs to understand the implications before it signs a loan with a second mortgage lender.

Some are under the false impression that allowing a subsequent lender to lodge a caveat will avoid breaching the negative pledge. From the bank’s point of view, a caveat will be just as clear of a breach as seeing a subsequent mortgage.

In saying this, there are many legitimate circumstances where a borrower seeks a second mortgage and will be comfortable risking its negative pledge to the bank.

The solicitor’s role and its obligation to their client borrower

Some solicitors insist that they have an ongoing duty to the bank requiring them to seek its consent to a second mortgage, regardless of their client borrower’s instruction. This likely arises from an erroneous understanding of the limited brief from the bank when acting on the original bank loan.

In that case, a solicitor will have no ongoing duty or obligation to the bank once it has completed settlement and registered the bank’s mortgage.

A solicitor has a primary obligation to act on its client’s instructions following receipt of full and frank advice. If a solicitor refuses to follow its client’s instruction they will be in breach of

the Lawyers and Conveyancers Act (Lawyers: Conduct and Client Care) Rules 2008.

Good legal advice on the negative pledge depends on who we are acting for and their circumstances.

Very generally, a first mortgage bank may be unlikely to provide its consent to a competing financier while a second mortgage lender is indifferent as to the first mortgagee’s contract terms.

From a borrower’s point of view, the decision whether to approach their bank for consent will depend on their individual situation and need. A technical breach of the negative pledge may well be an attractive option against the alternative - not getting the finance that the client may reasonably require.

The borrower should be made aware of the terms of the negative pledge and all implications and risk should be canvassed. Full and frank advice about the implications would explore the practical likelihood of the bank becoming aware of the breach, whether it is likely to enforce that breach and the outcome of such enforcement.

Importantly, it is the borrower’s decision whether to approach the bank for consent after being fully informed of the implications. The borrower has every right to advise their solicitor that they are aware of their obligations and instruct them not to contact their bank. ✚

Lee Kerr is a Director at law firm Sanderson Weir.

The Top 10 stories on tmmonline.nz

A lot has happened in the market since the last edition of the magazine. Here are the most-read industry stories from tmmonline.nz

01 MORTGAGE ADVISERS AIM TO “EDUCATE” COMCOM AND WANT IT TO APOLOGISE

The mortgage advisory industry is putting in a concerted effort to educate the Commerce Commission that its views of their role and motivations is plain wrong.

02 MORE PAIN IN STORE FOR MORTGAGE HOLDERS

The latest Reserve Bank figures show 59% of existing mortgages will move onto higher interest rates in the next 12 months.

03 COMCOM TOLD CLAWBACK PERIODS NEED TO BE REDUCED

The clawback periods of mortgage advisers' commissions should be much shorter and brought more in line with Australian practices, the Commerce Commission has been told.

04 GOOD AND BAD NEWS FOR HOME OWNERS FROM RBNZ

The Reserve Bank's latest monetary policy statement had good news and bad news for residential property owners.

05 RBNZ PUSHES GO BUTTON ON DTI RESTRICTIONS

Debt-to-income (DTI) restrictions and loosening of loan-to-value ratios (LVR) will be introduced by the Reserve Bank on July 1.

06 MERGERS AND ACQUISITIONS EXPAND NORTH SHORE MORTGAGE BUSINESS

Takapuna-based mortgage company adviceHQ is expanding.

07 DIFFERENCE IN SCORES A REFLECTION OF BANKING STUDY

The big gap in satisfaction scores between first place and the rest of the pack in Consumer NZ’s latest survey of the worst and best banks, reflects the findings of the Commerce Commission’s banking draft market study, Consumer NZ says.

08

ADVISERS AID IN DISCOUNTING FROM HEADLINE RATES: ANZ

Banks' ability to exercise discretionary pricing by charging some customers less than published headline rates is a very important part of banking and competition, ANZ New Zealand chief executive Antonia Watson told the Commerce Commission's conference on personal banking services.

09

MORTGAGE BORROWERS HEDGE THEIR BETS ON OCR COMING DOWN SOON

The one-year fixed interest rate is the most popular for mortgage borrowers as economists continue to pick this November as possibly when the RBNZ might lower the OCR.

10

ADVISERS' SHARE OF BNZ'S NEW LENDING DIPPED IN LATEST SIX MONTHS

Mortgage advisers accounted for slightly less of Bank of New Zealand's new mortgages in the six months ended March compared with the previous September half year, but adviser share of the overall portfolio continues to grow.

To keep up with all the news make sure you check www.tmmonline.nz regularly. Or you can get the news and rates update sent to you each day.

No Reg. valuation required

Any location in New Zealand

No consumer lending

Capitalised interest available

Residential, commercial and rural

No income verification or SOP required

Recently funded investments:

Pokeno, Auckland

First mortgage security

Security description: Freehold Section, circa 490m². All services on site ready to build

Valuation: $375,000

Loan request: $221,000

Loan to value ratio (LVR): 59%

Term: 12 months

Interest rate: 11%p.a. paid monthly in arrears

Purpose of funds: Residual stock lending post title issue from development lender

Exit strategy: Sale of the property

We assess loans based on LVR and the individual deal. We require first mortgage security over the property and a clear exit strategy.

Finbase is a trusted non-bank lender, who offers tailored loans for property investors, developers, and traders, providing swift funding without main bank restrictions.

We offer advances up to $2 million without income verification. Finbase provides First ranking mortgages for short-term property projects, with a maximum 12-month loan term.

Maximum lending of 60% of property value.

Red Beach, Auckland

First mortgage security

Security description: A road frontage, title issued freehold section of circa 380m2

Registered valuation: $615,000

Loan request: $330,000

Loan to value ratio (LVR): 54%

Term: 12 months

Interest rate: 11%p.a. paid monthly in arrears

Purpose of funds: Refinance existing lender, plus an equity release for development soft costs

Exit strategy: Refinance to a construction lender, when the new build home is ready to be built

Finbase offers several types of loans including bridging finance, property trading finance, and equity release.

Cambridge, Waikato

First mortgage security

Security description: Circa 130m2, large fully

renovated residential home

CV: $795,000

Loan request: $459,000

Loan to value ratio (LVR): 58%

Term: 10 months

Interest rate: 11%p.a. paid monthly in arrears

Purpose of funds: Funds used to settle the purchase of the property

Exit strategy: Put tenants in then refinance to main bank after 6 months consistent cash flow

For lending opportunities contact: