Mortgage brokers who focus solely on prime mortgages and investor lending are missing a major opportunity and could be placing their business at risk, according to a leading non-bank lender.
Strong housing markets in Sydney and Melbourne and record-low rates have kept brokers well fed with ‘set and forget’ home loans in recent years. But with rates tipped to rise and demand for housing finance beginning to slide, Pepper Money believes brokers should be looking beyond vanilla home loans.
“It is short-sighted for a broker to think that they can run a successful business on vanilla deals and property investors alone,” Pepper’s director of sales and distribution, Aaron Milburn, told The Adviser.
“There were brokers who had queues of non-resident lending clients that disappeared overnight. I think brokers need to have a well-rounded business, whether that be SMSF, self-employed, PAYG, specialist, the whole gamut — because you are a professional in this industry and should be able to offer everything your customers may need,” he said.
According to Mr Milburn, who led Westpac’s NSW broker distribution division before joining Pepper in January, brokers have a major opportunity to tap into the self-employed segment of the mortgage market.
“You can do a PAYG deal no problem. But if you do a self-employed deal and get it right, and that client has five employees, there might be five leasing opportunities, business credit opportunities, a deal that you could do for the staff through an employee referral scheme,” he said.
“The opportunities to open up additional revenue from doing one self-employed deal are phenomenal.”
Mr Milburn’s comments come after the latest ABS figures released this week show that housing finance fell to a four-month low in March. At the same time, sentiment among Australian business owners is on the rise.
In March, business conditions reached a post-GFC high, according to the NAB Monthly Business Survey, and brokers are seeing an improvement in their SME clients’ balance sheets.
“I’m noticing that my self-employed borrowers are doing really well at the moment,” said Melbourne-based broker Sean Murphy of My Mortgage Freedom. “I’ve got clients across six or seven different industries from hospitality to medical services and all of them are experiencing huge growth. Year-on-year they are able to spend more and borrow more. They are making much more money than they were three years ago, when things were a lot tougher,” he said.
Mr Murphy was a BDM with a non-bank lender before realising the opportunities that weren’t being seized in the self-employed space.
“Brokers just weren’t even looking at the deals,” he said. “I was able to build a business dealing with predominantly self-employed borrowers. The organic growth from that has made up my book over the last three years.”
Pepper’s Mario Rehayem said brokers can become specialists in the self-employed space quicker than they think.
“It takes about 20 hours to learn self-employed lending back to front,” he said.
Mr Rehayem and Mr Milburn will speak at Pepper’s 2017 Insights Roadshow, which kicks off in Melbourne at the end of the month.
[Related: Pepper reveals details of upcoming roadshow]
James Mitchell has over eight years’ experience as a financial reporter and is the editor of Wealth and Wellness at Momentum Media.
He has a sound pedigree to cover the business of mortgages and the converging financial services sector having reported for leading finance titles InvestorDaily, InvestorWeekly, Accountants Daily, ifa, Mortgage Business, Residential Property Manager, Real Estate Business, SMSF Adviser, Smart Property Investment, and The Adviser.
He has also been published in The Daily Telegraph and contributed online to FST Media and Mergermarket, part of the Financial Times Group.
James holds a BA (Hons) in English Literature and an MA in Journalism.
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