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The economic environment is changing, with rates now rising, house prices falling, and continuing natural disasters and conflicts adding pressure to the growth of the economy. But with any challenge comes opportunity. We catch up with MyState Bank’s head of lender distribution, Blake Albones, to find out where the opportunity lies
Q. What trends are you seeing in borrowing at the moment and where does future opportunity lie?
It’s an interesting environment with unprecedented rising interest rates and pressures on house values. The actual growth in the mortgage industry is still being fuelled by refinances at the moment.
But the investor market is certainly the opportunity that we see at MyState Bank. It’s an opportunity that brokers and also borrowers should see as well.
If you’re buying in the lull, that’s where you get your yields and your returns and I think that applies to all markets. So, while we might be seeing some tapering off of house prices and some corrections (which some might call a ‘lull’), this is where the opportunity exists for people who have positioned themselves nicely with the right equity, with the right structures, with the right incomes, to actually capitalise.
As we all start to balance our own books and make sure that we position ourselves strategically to take those opportunities, I think it’s going to be the investors that will shine through. And that is certainly something that MyState Bank is focusing on at the moment.
Q. Why do you think investor lending will be strong?
With a lack of stock in the market, there is a supply issue and when you’ve got high demand and low supply, it pushes up the value of rent.
Those that have properties mortgaged with the banks are the ones that are sitting pretty at the moment. The lenders are all fighting for business from a smaller pie, so there’s still some great investment rates out there at the moment. There are cashbacks; there are great opportunities to restructure debt to make sure that you’re maximising tax advantage; and with vacancy rates in all capital cities know below 1 per cent, if you’ve got a property for rent, it’s not going to be vacant for too long.
The other side of the coin is the potential investors; for example, those that have equity in their property and might want to think about getting in. Do you forego short-term capital growth for higher rental yields, knowing that it is a long-term proposition?
Q. What makes investor buyers different from owner-occupiers?
Decisions should be driven by data and returns rather than what the property looks like and what suburb it is in (as an owner-occupier would consider). Potential buyers may not be able to buy in the suburb that they want to live in, so they can rent there but purchase an investor property in another market.
To quote The Block: location, location, location. You just have to do your sums. And this is the role of the broker and where the trusted adviser really starts to shine through. It’s about talking to the people who have been around long enough and providing that sound advice and more importantly, making sure debt structures are right.
Q. Why is MyState Bank looking to grow its investor book?
We regularly review our flow and portfolio makeup and can see an opportunity for growth in the investor spaceWe review our risk appetite every 12 months and one of the customer segments that we were a little bit ‘low’ on was the investor space. We are nimble enough to make quick decisions and swing that pendulum of our portfolio very, very quickly. So, we’ve really started to have a look at our proposition to make sure we can actually attract investors. And we’ve gone after them and we’ve gone after them hard.
It’s not just about the buffer rate, but also we assess negative gearing, how we look at the shading of rental income, and how we look at net expense (and not just using HEM) ... All of the loans at MyState are assessed by human beings, too, so that gives brokers the opportunity to actually talk to the assessors. We can have a look at the actual figures and make a proper credit decision based on actuals, and not relying on algorithms.
Our pricing on investment loans is very competitive in the market at the moment. Our pricing on investment loans is very sharp; we’re certainly in the top quartile. When you’ve got a sharp-carded rate, that actually helps in terms of the borrowing power as well. Which is where the broker comes in. So, it is the role of MyState to get out and talk to as many brokers as possible.
Q. What advice would you give brokers looking to build their investor client base?
If you turn on the TV, pick up a newspaper, or wherever you catch up on the news, it’s all about interest rates, cost-of-living pressures, and electricity prices. So, every single person in Australia will be looking at their financial positioning and considering if they are stable and safe, and where the opportunities are. It can’t be all doom and gloom.
So look at your communication strategy. Brokers should be working their databases and talking to their clients and asking what their short-term and long-term goals are, and what their retirement goals are, and making sure that they set up their structures correctly and align themselves with banks that want to help the consumer. It’s about communication and staying in contact.
If you’re going to sit back and wait for us to get over this six to 12-month ‘lull’, then ‘you snooze, you lose’. I think the opportunity is to get on the front foot. The market’s certainly slowing, there’s no two ways about that so we should have a little bit more time up our sleeves. Let’s build that business plan and run hard at it.
So, communication’s going to be the key. But generally, I’m very buoyant about what 2023 looks like.
Tune in to hear more!
Find out more about MyState Bank’s focus on investor lending on The Adviser Podcast Network.
You can hear the full episode, partnered by MyState Bank: In Focus: The future opportunities in lending.
Blake Albones
Head of lender distribution
“Any advice does not take into account your personal objectives, financial situation or needs and you should consider whether it is appropriate for you. Past performance of financial products is no assurance of future performance. While we do our best to provide accurate information, we accept no responsibility for any inaccuracies that may be communicated in this article
MyState Bank Limited ABN 89 067 729 195 AFSL 240896 Australian Credit Licence Number 240896. A wholly owned subsidiary of MyState Limited ABN 26 133 623 962.
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