The CEO of a boutique aggregator has slammed a report that claims expenses are “fudged” by brokers in order to get a loan over the line.
The report by JCP Investment Partners, released this month, quotes an unnamed Sydney mortgage broker and claims inaccurate information is being provided to banks about borrower’s living expenses.
The report states: “A recent conversation with a high-end Sydney mortgage broker was a revealing insight to practices: 'if we included private school fees and child care costs, there would be no borrow'. Expenses are quite simply fudged. Gone is the historical rational reliance on gross income and 3x that as the maximum mortgage lend. The banks appear to have weakened underwriting standards to pursue the asset backed lend – sustaining credit-fuelled house prices."
It’s a claim that Tanya Sale, CEO of Outsource Financial, has labelled “ridiculous.”
Speaking to The Adviser, Ms Sale argued that no research had been done and that one Sydney mortgage-broker could in no way reflect all mortgage brokers.
“They’re dealing in a Sydney environment, where the prices in Sydney are just ludicrous. So if you’re going to have a conversation – [you need to] have a conversation with many [brokers] and a varied range of mortgage brokers,” she said.
Ms Sale also branded as “outrageous,” the claims by the anonymous broker that, “If we included private school fees and child care costs, there would be no borrow”.
The aggregation chief said the broking industry has — rather than cut corners — embraced regulation and performed the due diligence in proving consumer’s expenses.
“I think brokers assess their clients a hell of a lot stronger than a retail side, that’s for sure,” she said, pointing to brokers writing more than half of all loans as evidence of consumer confidence.
Meanwhile, two senior economists have questioned the report’s claim that interest-only loans could be “Australia’s sub-prime”.
Angie Zigomanis, senior manager of residential property at BIS Oxford Economics, refuted JCP’s claims that interest-only loans are equivalent to the so-called “ninja” or ‘sub-prime’ that triggered the global financial crisis.
“I suspect [Australian] financial institutions are a lot more careful about these loans. In the US, a lot of these loans were being securitised and sold off the banks’ books… in this case, most of the banks are responsible for the lending, so you would assume on that basis that they are being more careful compared to what happened in the US,” Mr Zigomanis said.
AMP Capital senior economist Shane Oliver echoed these views, adding, “I think there's a big difference... these people who have got loans, they may be interest-only loans, but they have jobs, they're not bankrupts or people who could never get a loan”.
[Related: Major bank in court over home lending]
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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