Brokers ‘must change their borrower mindset now’, says Joust CRO

According to Joust’s Anny Le Wilson, a lesser-explored impact of the changing landscape relates to how brokers should be approaching things in the new year.

“Traditionally, it’s been relatively straightforward to look over the finances of a prospective borrower. Judging the credit risk, serviceability and property security of a borrower has been even easier during this recent period of record-low interest rates and the shift to decrease the serviceability calculation rate by banks. 

“It allowed lower income earners to borrow more with some stretching into higher loan-to-value ratio (LVR) and Lenders Mortgage Insurance (LMI) territory,” she explained.

However, as inflation continues to rise and the central bank hitches up the cash rate to quell it, the ramification is that “it’s no longer viable to assume that high LVR in a mortgage is a sign of a bad borrower or someone with bad credit,” Ms Le Wilson commented.

“These rate rises, and subsequent falling property values across the country have resulted in skyrocketing repayments and have left many with a lot less equity in their homes,” she explained.

“As such, there are a lot of mortgage holders out there with stable incomes and who are still able to make their payments, but who are looking to consolidate. They might have borrowed at the height of the market, or perhaps they used spare income to renovate during the pandemic, and now their risk settings have changed due to factors beyond their control. 

“Now is the time to remove some of these preconceived notions of what makes a good or bad borrower, because there is also an opportunity here for brokers,” she said.

As we head into a new year, the Joust CRO suggested that 2023 will continue to see non-banks and non-traditional lenders (“who are empathetic to the market and who are ready to take advantage of the opportunities that the big banks won’t”) gain traction.

She therefore suggested that brokers should be using the first few weeks of the year to “upskill themselves in the second tier and non-bank lender territory and be prepared to talk to clients in that high LVR territory and in credit distress”.

“While we are in the quiet period, this is the best time to focus on gaining those extra accreditations for the lenders that they haven’t typically worked with,” she said.

“It’s also time for a mindset refresh, to start thinking more expansively around the products you’re going to offer. 

“There’ll be a lot of latent demand coming into the market, and borrowers who will be harder to service, so brokers need to be proactive in taking advantage of that high demand and deepening their “trusted adviser” relationship with their clients to help them through the upcoming difficult financial journey that many will face.

“The Christmas break and traditional quiet period in January is a fantastic time to get ready for the challenges and opportunities that 2023 will provide,” Ms Le Wilson concluded.

[Related: 'Golden opportunity’ for brokers as borrowers fear loan rejection]