Brokers continue to shine in tougher market

Mortgage broker industry leaders have shared their thoughts about how brokers are continuing to prove their value to customers in a more difficult lending market and the efforts peak bodies are making to ensure there’s a level playing field on refinances.

MFAA CEO Anja Pannek (pictured above left) and FBAA managing director Peter White (pictured above right) took part in a ground-breaking panel discussion at the 2024 National Finance Brokers Day event in Sydney, alongside CAFBA CEO David Bushby.

It’s understood to be the first time the heads of the mortgage and finance industries’ three main peak bodies have come together to take part in a forum in front of an audience.

The panel discussed a number of topics including Revenue NSW’s controversial payroll tax on aggregators, artificial intelligence and commercial and asset finance lending.

Lending market challenges

Panel host Nectar Mortgages head of distribution and growth Andrew Stevens asked Pannek about the lending market and what opportunity brokers had to access the products that could assist their clients in the current economic environment.

“It’s interesting – we’ve seen 425 basis points of cash rate increases and mortgage broker market share is stronger than it has ever been before,” Pannek said.

“We don’t want to go through what we saw last year – a frenetic market share grab by lenders competing for products … we did not see great behaviour with certain cohorts of lenders.”

Despite the fact that activity levels are lower and it’s tougher to get deals done, broker market share continued to rise and aggregator volumes are still quite high, said Pannek.

One of the changes in the last few years was the trend of more customers seeking loan approvals in-principle, reflecting housing market dynamics.

Pannek said serviceability and borrowing capacity were major challenges.

“But with all of this complexity, what does it mean? More people want help, they want solutions,” she said. “They're trying to figure out what to do with really big decisions, and if that's their own home, if it's for their business, how do I access credit?”

Pannek said with lower lending activity, the broker proposition shone through as people sought brokers guidance to help navigate a complex market.

Loan discharge reforms

Pannek said there were good opportunities for the industry to look at “where there are friction points” and focus on making brokers’ lives easier.

This included recent discharge reforms Treasurer  Jim Chalmers announced which made it easier for customers to refinance their home loan by giving them access to the forms needed to exit a mortgage.

“I think the government can go further to make it easier for brokers to work with their clients, to make it easier for clients when they make a decision to move on,” said Pannek.

The role of the MFAA was to make it easier for brokers to do what they did best – assist their clients.

Pannek said MFAA members reported that certain things got in the way of this, such as last-minute retention offers.

“Our role is to try and find ways to advocate, to shine a light, to do research, to highlight there are opportunities for change. Yes, we're doing it for our members, but at the end of the day, we're doing it for consumers and business owners,” she said.

Refinancing

Stevens said with higher interest rates, refinancing had become more difficult for customers.

He asked White what changes and challenges he had observed when it came to lender retention processes for clients trying to refinance through brokers.

“What do you foresee as the trends impacting broker volumes across the overall market moving forward?” Stevens said.

White said the FBAA had been consulting with a number of government bodies, including the ACCC and Treasury, about bank practices when it came to refinances.

“Particularly in regards to what happens when a refi’s happening and deals getting pulled at the last minute because of borrowers being given the best deal on the planet they were never given beforehand,” said White.

The FBAA’s position to Treasury on mortgage refinances was that banks  “should put their best deal on the table from day one, when you know that it's been queried and that's it”.

“There’s plenty of business in this world for everybody to share the benefit of the outcomes of that. This business of putting cheaper rates and a pot full of money just 24 hours out from a refi is absolute bull…t and shouldn't be happening.”

White said Treasury was looking at bringing in a 10-day parameter and while it was a good first step it wasn’t good enough. “We’ll keep working on that, and we’ll see where it lands.”

Rising interest rates

In terms of higher interest rates, White said the FBAA undertook research, starting before rates hit “rock bottom” and then after rates began rising.

He said while government ministers accused him of scaremongering when it came to rates “the reality is the rates were always going to go up”.

People who hadn’t been in the mortgage industry long might think Australia was now in a high interest rate environment, but that wasn’t the case.

“The first home loan I wrote when I was at CBA in the 70s was at 18.5%. So these [current rates] aren't high interest rates. When you look at trying to get some market stability, rates around that 6% or 7% [level} probably isn't a bad balance to get consistency – not too high, not too low,” he said.

When interest rates had been so low for so long, it was always going to be a shock when they rose, said White.

However, Australian borrowers had shown their resilience and with the help of brokers the number of people in financial stress was not as bad as the FBAA’s research had first predicted.

White acknowledged some people had used up their cash reserves, sold assets, and changed their spending habits to cope with rising rates.

A 25-basis point reduction in the cash rate is needed, he said, but he predicted it wouldn’t happen until the second quarter of 2025.

“I can't see rates going up – that would be disastrous for the country,” said White.

Having an interest rate environment at the bottom end of the 6% range would create long-term stability and “settle down” house prices.

White concluded by saying the broking and lending sectors were performing well and there no major regulatory framework issues. ASIC had stopped auditing BID while complaints to AFCA about brokers remained low.

“What we can't do is become complacent about that. So don't take shortcuts. Do what you know you need to do, follow the rules, and we'll stay under the radar whilst we continue to grow.”

How are brokers showing their value as mortgage experts in a tougher lending environment? Share your views in the comments section below.