Industry pioneer Mark Bouris has outlined what he believes will be the most significant developments in mortgage broking over the next few years.
For a start, the Yellow Brick Road chairman says Australians should not be loaded up with a 30-year mortgage.
“One of the things that is really important to me and I think will be the most important emerging product and service between brokers and planners is financial management. By that I mean budgets and showing someone how to pay their mortgage down faster than the schedule,” Mr Bouris told The Adviser.
“Usually, once someone borrows money from you, they don’t want to deal with you. But if you could show them how to pay it off faster, they will deal with you. And they’ll pay you for that,” he said.
“The digital age is giving us some opportunities in that regard. We’ve been working on a fintech solution for some time now. It’s an opportunity for a mortgage broker or a planner to show somebody how to pay their mortgage off faster using a digital platform.”
YBR recently partnered with Rubik as part of the transformation of its wealth division, which will see franchisees write 80 per cent of advice recommendations in-house. Rubik has also been working with the ASX-listed group to develop a platform that will allow brokers to help their clients manage their money.
Mr Bouris said strict discipline is essential if a client decides they want to get out of debt quicker, and the broker or planner has to keep the client accountable.
“A digital budgeting process is the only way you can do it properly, where you ring the client every week and tell them that they overspent or underspent,” he said.
“To me, this will change the way things are done. I’m not going to say only YBR people can use it. I’m going to offer it to anybody. I think every broker in this country should be connecting with their client and finding a way for them to pay their mortgage off faster.”
While some brokers may be reluctant for clients to veer from the repayment schedule, Mr Bouris explained that the long-term benefits far outweigh any perceived drawbacks.
“The more equity a client builds, the more likely they are to buy another property. Those that don’t buy another property are highly likely to refer you to a friend, particularly when they say that their broker helped them get out of debt faster,” he said.
Mr Bouris said there are two things he focusing on over the coming years.
“One is that a broker should be able to help a client pay off their mortgage faster than the 30-year schedule and be allowed to charge a fee for it,” he said.
“The second thing is there should not ever be a sale of a mortgage in this country unless a client signs a document saying they understand how mortgage protection works. Not just a conversation – they must sign off something before the loan settles. I actually think it should be legislated.”
RBA governor Philip Lowe recently warned that Australian households are carrying more debt than they have before.
Mr Lowe told the Australia-Canada Leadership Forum that the interaction between consumption, saving and borrowing for housing is a “significant issue” that the RBA is watching carefully.
“It is one of the key uncertainties around our central scenario for the Australian economy,” Mr Lowe said, adding, “We are still learning how households respond to higher debt levels and lower nominal income growth.”
Mr Lowe said an increase in housing prices has gone “hand-in-hand” with a further pick-up in household indebtedness.
[Related: Bouris says YBR 'vision' has changed]