Opportunity knocks

With change, there’s always opportunity. Brokers and lenders have a role to play, and that is making sure people understand the changes that are happening in the marketplace. These changes potentially bring confusion to consumers.

Brokers are in a fantastic position to offer the help, guidance and advice that customers need to ensure they understand these changes, to make informed decisions and make sure that they get the right deal for them. I acknowledge it’s a period of change for brokers, but if they embrace this opportunity, they’ll also be able to make the most of it.

Is APRA doing so solely to take the heat out of the Sydney market?

The key here is that the low-rate environment helps drive significant growth in the investor housing market. APRA is making sure that there are responsible lending practices throughout the industry. These include the announcements around the prudential practice guide and the buffers and flaws in lending, as well as the cap on investment lending for ADIs [authorised deposit-taking institutions].

It’s all about making sure that we’re in a position to deal with not only the situation today, but also when interest rates rise in the future, that people are in a great, sustainable position with any loans they might be taking out now.

The focus is ultimately on responsible lending practices, which is something everyone supports.

What could be the ramifications if investor lending is not curbed?

We’re stepping in now to make sure that, after a period of record-low interest rates that have helped drive growth, people are really focused on making sure that the lending they’re undertaking today is responsible, and that when interest rates rise in the future, customers out there are able to meet repayments.

How are brokers coping with the investor lending changes?

I think what brokers are finding at the moment is that there is an avalanche of information coming to them from all lenders, because many lenders are making changes, and they’re making them frequently. That’s a pretty hard situation for brokers to be in, because they have to absorb all of that information, analyse it, and be able to use it in the next interview they have with a customer.

The opportunity here is that it sets brokers up to be that trusted point of help for customers during these changes. This is a fantastic position for the broker to be in. That’s one of the reasons why we’re now seeing over 60 per cent of all home loans now being written through brokers. NAB has been encouraging brokers to make sure they’re on the front foot during this period of change – to make sure they’re making the most of the opportunity to be that trusted adviser to consumers.

Have you been actively engaging with brokers about these changes? 

We’re always really active with brokers. We want to make sure that brokers understand the changes and why they’re occurring, so we’ve absolutely been out there educating them about the changes, and we will continue to do so.

How have brokers responded?

The brokers we’ve been speaking to have really been seeking to understand what the changes are. I think more have walked away with the ‘change equals opportunity’ mentality and are focused on educating their customers. They have to be able to explain the changes to their customers, but they must first understand the changes before they do so.

NAB’s subsidiary, Advantedge, has introduced preferential pricing for owner-occupier borrowers. What was the thinking behind this?

We want to make sure that the growth we drive is sustainable. We made the changes to our home lending policy and pricing to offer those discounts and make sure we are looking to the part of our portfolio that we want to grow right now, which is the owner-occupier segment.

We are providing a great opportunity for brokers to work more in that space, and we want to attract as much business as we can. This is a part of the market where there is still huge opportunity for growth.

Has NAB witnessed a slowdown in its investor lending since APRA’s crackdown began?

It takes several months to measure the change in these sorts of markets. Applications and settlements take quite a long time, so it will be some time before we can make that judgement.

You’ve also got to consider that many first home buyers (FHBs) in Australia are investors, and we’ve seen an increase in that portion of the market over the last few years. The issue is that you may not see that in the statistics for FHBs.

Is APRA’s investor crackdown unprecedented, or is it merely history repeating itself?

I think there are always cycles that markets go through, and what we’re experiencing here is just another cycle.

It’s always interesting to see the reactions from the market as it moves through these types of cycles. That’s why it’s a fantastic thing that we can use publications like The Adviser to help educate brokers about these changes so that they can then talk to their clients about them and help them understand what’s going on in the market. That is the key thing that the industry has to do right now – ensure that people understand what’s going on and why.