INDUSTRY OUTLOOK -- Grassroots736 people have read this article
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| Friday, 31 July 2009 |
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Broker panel WENDY BENNETT MORTGAGE WISDOM Melbourne, Victoria DAMIEN MIFSUD LJ HOOKER FINANCIAL SERVICES Brisbane, Queensland VERA MORTIMER BERNIE LEWIS HOME LOANS St Peters, South Australia MARK MELLICK AUSPAK FINANCIAL SERVICES Maroubra, New South Wales MARK ROGAN FINANCIAL DECISIONS Mona Vale, New South Wales LINDSAY ROGERS AUSSIE HOME LOANS Sydney, New South Sales 1 What are your main expectations or concerns regarding economic conditions for the remainder of the year and how will this impact your business strategy? MARK ROGAN I started to look at my business strategy last year in light of market changes and incoming legislation. I decided to do my financial planning diploma to ensure I was qualified to provide advice. I also thought that to survive it would be good to be part of a bigger organisation, so I merged with a financial planning company. I’ll also continue to look at smaller acquisitions; we’ve had a number of smaller brokers and financial planners approach us already. I’ll also focus on harnessing business from my existing database and tapping into clients acquired via our merger. LINDSAY ROGERS I’m expecting things to run along fairly smoothly. From what I’ve been hearing and reading, the economy is kicking along reasonably well; people are still reasonably busy and active. I believe there’s still potential for business in many areas. I previously operated as a one man band, but I’ve just brought on another loan writer to help me capitalise on [opportunities within] my existing client base. VERA MORTIMER My main concern is just how quickly the economy [will] rebound. This will impact the whole dynamic of the market in terms of interest rates and first home buyer activity. The impact on my business is not really a concern [for me] however. Over the past six months [my business has] seen the greatest growth than at any other time in the past ten years. I see continued growth once economic conditions improve and investors regain confidence. WENDY BENNETT I’ve been through other recessions and this one is very different. I think we are going to endure tougher times, particularly in terms of unemployment. I haven’t had any clients come to me with employment problems yet however. In Melbourne there is still some buoyancy in the property market; auction activity has been quite strong. The stimulus packages are helping but I don’t think we’re out of the woods just yet. 2 What are your expectations for borrower activity in the second half of 2009? Which market segment(s) do you expect to be most active and why? VERA MORTIMER First home buyers have definitely activated the market and I expect this to continue along with investor activity as the year progresses. While the first home owners grant is available people will continue to try to enter the market, even though it’s tougher to qualify. Once the September quarter is over and the first home owner grant reduces, investors will start coming back into the market. I think many investors are concerned that first home buyers are pushing up prices so I would expect them to come back from October. MARK MELLICK I expect first home buyers to continue [to drive activity] but probably not at such a rapid pace as we’ve seen in recent months. Even if it does slow it will take a good 12 months for that to really happen. The middle tier of the market will start to come in more – people upgrading and taking advantage of lower interest rates. Investors will definitely come back as it’s a great time to invest. If you can lock in a fixed rate around 6 per cent, compared to 8 or 9 per cent 12 months ago, that’s very attractive. Brokers should concentrate on their databases and existing clients, and they’ll be sure to pick up business that way. WENDY BENNETT Throughout the second half of the year I think first home buyer business will continue to be quite strong, although [first home buyers] will have to have some money behind them. I’m starting to see interest in investment purchases and I expect this trend to continue. I’ve done very little refinancing to date. I don’t see the point in [clients] paying to change [lenders] unless it’s really going to change their life dramatically. DAMIEN MIFSUD As the first home owners boost reduces and expires there will a shift in focus to investors who are potentially holding back until the first home buyer market cools in the sub $500,000 [market]. With the banks maintaining lower LVRs and genuine savings requirements, and with the reduction in the grant, there will be fewer first home buyers active in the market at the end of the year. 3 Lender servicing levels have been a problem for some time now. How have you managed this with your clients? MARK MELLICK Clients have had to be educated about new servicing times as well as the underlying reasons for the slower turnaround [in approvals]. It’s important to manage clients’ expectations from the start. I’ve told clients to expect longer times so that I can exceed their expectations. In saying that, servicing times haven’t affected my business. I’ve found my lenders have been very supportive. It also helps to support them and work smart. If I put in a call I’ll address four files at a time, rather than calling back four times. It’s about effective communication, transparency and leveraging off lender contacts. VERA MORTIMER Lender servicing has caused frustration. Prepositioning clients at first discussion or the first meeting certainly makes like easier. If it’s an urgent deal then you just have to go with the appropriate lender. It also helps to explain the reasons behind the banks’ servicing delays so clients understand it’s not your fault. MARK ROGAN It has been manageable in that we’ve rewarded lenders who reward [our] loyalty. I’ve also made sure I tell clients upfront what [response time] they can expect and then they tend to deal with it okay. It is hard though and it has put a lot more pressure on us. You have to sweat it out for ten days before you know if a loan has been approved. There’s also a lot more required in terms of reassuring other parties involved, like the solicitors and real estate agents. LINDSAY ROGERS The only thing you can do is make the client aware of servicing times from the start. Tell them to forget five-day cooling off periods. Customers generally take the news okay in the beginning, but it’s hard to prepare them. They come under constant pressure from other parties – the real estate agent and the vendor’s solicitors – and it’s really horrific for them. You can only hope that the honesty you showed and preparation you gave them in the beginning will stand you in good stead. 4 Lending policy has tightened dramatically in recent months. How has this impacted your business? WENDY BENNETT I understand the changes, but no lead time is difficult. It’s pretty tough. A couple of months ago policies were changing frequently. The biggest challenge is keeping up with the changes. There are still high LVR options, with most banks offering up to 95 per cent for existing clients, but you’ve got to be on top of their criteria. VERA MORTIMER Changing policies have definitely put pressure on loan qualifying abilities, particularly for first home buyers. Many borrowers cannot understand why they could once get a 100 per cent loan but now need 5 per cent genuine savings and in most cases a 10 per cent deposit. It’s a matter of preparing clients and communicating the need for good savings strategies. MARK ROGAN I speak to a lot of brokers and the consensus is that lending policy changes are making things a lot harder. I can spend three times as long putting files together now. Our commissions have been reduced yet we are spending more time getting loans through. We also have to educate clients. It hasn’t hit the number of applications I put in but you have to work harder to find a lender. MARK MELLICK In general I believe the banks should be commended for addressing [their lending] policies, especially in relation to first home buyers. Across the board I think tightening up [lending criteria] is good practice. It demonstrates why our financial system is in such good shape. This isn’t the first time there’s been a credit crisis. Everything repeats itself and I think lenders will continue to tighten up and then loosen up. It’s a cycle. LINDSAY ROGERS The increased grant encouraged so many people into the market with no savings and no demonstrated ability to service debt. Tightening up of lending policy is a good thing; it will make sure people are not over-extended. Yes, new policies have had their impact and some clients have been very surprised by the changes but when you think back to how things used to be you realise just how easy credit had become. 5 All indications are that we are nearing the bottom of the interest rate cycle. Would you recommend locking in a fixed rate yet? If not, when and why? VERA MORTIMER The economists are saying variable rates will stay low for 18 months so if you fix now you are paying a premium for it and will be paying more. It really depends on how quickly rates go back up. Fixing might offer a bit of extra comfort for first home buyers, but apart from them, I wouldn’t recommend fixing to anyone. There has been a lot of interest in fixing; I think the high fixed rates in the nines are still strong in borrowers’ memories and they are worried fixed rates will end up there again. Really, you just have to give them the options and let them decide. If only I had a crystal ball. MARK MELLICK When rates go down it’s front page news but fixed rates have gone up consistently and it’s all flown under the radar. If I were to call it, I’d say we’ve bottomed out. I think variable rates will stay low for another 12 to 18 months but there will be more upward pressure on fixed rates. In terms of recommending clients to fix, it always comes down to the individual’s circumstances. But the way [rates are] travelling now, if a client wants to fix, I don’t think they will go any lower. DAMIEN MIFSUD Looking back over the last 10 years the quickest rate rise was from between May 06 and Aug 08 when there were seven 0.25 per cent rate rises in a pre-economic crisis market. Compared to now the media portrays much more doom and gloom so the expectation should be that rates should be steady for some time before the RBA has to use the cash rate as a tool to curb inflation again. I guess the easiest way to describe whether you will save money from choosing a fixed rate is to liken it to playing at the casino, remembering that the house always wins (eventually). 6 Where are the greatest opportunities for business / revenue growth over the coming year? LINDSAY ROGERS Obviously your existing client base represents opportunity – that’s the reason I’ve brought on another loan writer, to help me harness this opportunity. We’re also focused on generating revenue through other avenues, and I’m finding credit cards and mortgage protection insurance are doing very well. They very much go hand in hand with existing business. Hopefully these initiatives will help offset some of the losses from commission changes. DAMIEN MIFSUD Client services: both pre- and post-settlement. Some people may not recognise this term and may be more familiar with cross-sell opportunities. I think a lot of mortgage brokers have started to change or adopt different income streams. Where will the cross-sell stop? Will we be like a vending machine or a supermarket? Will we be product floggers if we offer too many things at once? Or will some see this as value? I guess it all comes down to the delivery [of the service] and whether the client actually needs it. MARK MELLICK There will continue to be opportunities with first home buyers. Customers refinancing and trading up will also present opportunities, as will risk insurance and life insurance products. It’s not just about cross-selling; if you don’t sell it someone else will. There’s a flight risk there. And buyers want a one-stop shop. Even if you don’t specialise in everything, have a way of offering it. 7 How do you expect incoming legislation will impact the industry and what are you doing to prepare for regulation? WENDY BENNETT From what I’ve heard, good things will come out of the legislation. We’ll get rid of the people we don’t want in the industry and if all brokers are on the same page in every state, that’s got to be a good thing. The biggest impact will be if we need individual licencing and what the time frame for compliance will be. MARK ROGAN [Legislation] will raise the bar in terms of the professionalism of the industry. The common view is that it’s going to shake out the rats and the mice and improve brokers’ reputations. I also believe it will put some pressure on industry bodies; brokers just don’t think [industry] bodies are doing a good enough a job in terms of representing us. Regulation is also going to put more pressure on one man bands. I can see smaller businesses coming together – even if it’s not merging, just finding some kind of arrangement, a co-operative with which to share resources. My only concern is how far [regulation] goes and how much responsibility we end up with. VERA MORTIMER These are inevitable changes and I will do what is necessary to adapt. I’ve already done my Certificate IV and if I need to do something else I will do it. If the industry wants to take itself more seriously this is what we need to do. DAMIEN MIFSUD It will only have a good effect on the industry. Unfortunately for brokers who are still around after the dust settles we will see tougher competition [as a result of regulation]. Gone will be the days when you would win deals off other brokers because they were only form fillers with no prior lending experience and limited product knowledge. I think a lot of mortgage brokers have started going down the path of Certificate IV or better. As with every mortgage broker we just hope we don’t end up with [regulation] that is going to be over-compliant and unworkable and, even worse, confusing for clients. LINDSAY ROGERS Anything that slows down [the number of] people coming into our market is a good thing. It ensures we have good, committed people looking after borrowers and their finances in what is often the biggest financial decision they will ever make. |
