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Broker calls for vigilance as clients grow ‘desperate’

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Reporter 4 minute read

Loan Market broker Lee Wisniewski has urged the industry to more carefully consider loan applications from an increasingly desperate clientele.

In an interview with The Adviser, Mr Wisniewski stressed the importance of a careful examination of clients’ credit histories before processing loan applications.

He expressed concern over the rise in the number of clients pursuing property investments they cannot afford.

“I’ve got a lot of people that come to us that we can’t help who have just bought a block of land and need to settle,” the broker said.

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“[It’s] not uncommon that land developers are selling property to people that literally cannot find the funding.”

The Loan Market broker believes that many investors are “changing their story” to secure a loan in order to bypass tightened lending restrictions.

“I think it’s just a bit of desperation on people’s part because they feel a bit too restricted on lending at the moment and so they’re trying to get their way out of it."

Mr Wisniewski's was speaking to The Adviser's Elite Broker podcast, where he was asked about a recent Digital Finance Analytics (DFA) report that found more and more home loan applications are failing to convert to funding. 

DFA principal Martin North said that the data, which is based on 52,000 Australian households, shows that more multiple applications are being made to a portfolio of lenders in an attempt to get a single approved loan.

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“Essentially, they are backing both horses,” Mr North explained. “They are talking to brokers and potentially putting applications in via brokers but also putting applications in themselves.

“It is creating a lot of noise in the system. That means there is a much lower probability of an application a broker is handling translating into a funded loan.”

Mr North pointed out that consumers understand that credit has become tighter following the introduction of macro-prudential measures.

“They understand that the hurdles are higher now,” the principal said. “They don’t necessarily trust one channel over another, but they will try this portfolio approach and see what turns up. The fact that the processes are far simpler now than they used to be is making it easier.”

 [Related: Investor rates to hit 6.5% by 2020: QBE]

Broker calls for vigilance as clients grow ‘desperate’
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