As we begin the new year, we asked several members of the industry to share their predictions on what they think will happen to the mortgage broking industry in 2018.
Tightening of the screws
Ross Le Quesne, Aussie Parramatta
“We’re constantly getting more and more regulation and the screws are really being tightened on the broking industry. We did The Adviser’s Study Tour in the UK a few years ago and that space is very highly regulated. And the broker flows increased because of the regulation, so it’s a double-edged sword. The more business that we do, the more scrutiny is going to be on us, but the more scrutiny is on us, the more business flows in.
“Looking at what happened overseas and in the UK especially, I think this is just the start of more scrutiny. You have more commission, more inquiries, and I think the regulation is here to stay and that compliance is going to be a more important part of our business moving forward.
“That said, with that compliance and with that regulation comes opportunity. So, I guess for brokers it is about how you process that and how you build those requirements because there is plenty of business to be done even if there is less business for good brokers. Even moving to the digital age, people still want experts to deal with a big transaction. It’s not every day that someone spends close to $1 million on a property; they are going to want an expert to help them. With this comes opportunity, so I think there is lots of opportunity in 2018 for people who are willing to spend the time, get educated and do it the right way.”
Asset finance growth outpacing mortgages
Clive Kirkpatrick, Vow
“I see the market remaining pretty strong in both Sydney and Melbourne. There are still very large population sizes in those two cities and ongoing growth, which continues to put pressure on the current level of housing. So, I think the market will continue to be strong and brokers will continue to grow their share of the mortgage market.
“Commercial and asset finance will continue to grow, and I expect broker market share to actually grow at a faster rate in that segment than even the mortgage segment.
“And a more overarching idea: I think 2018 will be challenging from a macro point of view because we will have the Royal Commission that will absorb a whole bunch of resources at the lender level and it will be an interesting year.
“There was a comment from the Treasurer recently, saying that the budget looks like it is going to repair itself. The government won a recent by-election, so it will be in a stronger position in 2018.
“Unemployment remains pretty stable and looks like mining is coming back a little, so it could potentially have the basis of a pretty strong year, mitigated by some continuous changes in regulation, etc.
“So, it will be challenging because it will continue the air of change, but I think the underlying fundamentals are actually going to be really strong in 2018.”
Resolving the uncertainty
Marissa Schulze, Rise High Financial
“I think that 2018 will be a really good year for the industry because a lot of that confusion, uncertainty will be resolved, and I think that will help brokers be able to focus on what they should be focusing on: increasing their business rather worrying about the potential changes.
“I think that the regulatory stuff that’s been going is positive for our industry in the sense that it will establish our industry at a new level in terms of professionalism. And I think that ultimately it will all work out in the end.
“I think that a lot of brokers have been caught up, potentially, in the hype of it all. But I think that, really, when it comes down to it, there’s not going to be that many material changes that will really impact our businesses that much. So, I think we should just sit tight and wait for it to all be resolved.
“I think the Combined Industry Forum has been doing a really good job, and I think that all the people involved have been doing a really good job in terms of fighting for our industry. So, from a broker perspective, I feel quite pleased that we’re getting supported and that we’ve got the right people on the team fighting for our industry. And I think that that’s why we’re going to get a good outcome, because the right people have been working towards the right outcomes.”
Harder to cut through the fog
Stuart Donaldson, Banyan Co
“I think it’s going to be a challenge to get through the fog of next year because there’s been an enormous amount of industry activity, be that the Sedgwick report or ASIC reviews, or interest rate activity, government intervention... all that sort of stuff.
“So,my advice to brokers in 2018 is to use the [Christmas break] — when things do go a little quiet — to plan and work out and structure your business over the course of the next year. Focus on what is going to put food on the table and focus on what’s going to satisfy your clients and put yourself in the position to stand out from the crowd.”
A leaner year
Tim Lawless, CoreLogic
“Overall, 2018 is set to be a quieter year for the property market. Previous downturns have seen the annual number of sales fall by around 20–25 per cent from peak to trough. Considering the cyclical peak in transactional activity occurred over the 12 months ending August 2015, year-on-year transactional activity is already 13.2 per cent lower than the most recent peak.
“Industries reliant on housing turnover, such as real estate agencies, valuers, brokers and peripheral services (such as pest and building inspectors and conveyancers), could be in for a leaner year in some markets. Businesses seeking to maintain their revenue uplift will need to work smarter and look for new ways to improve their overall market share.
“While our outlook for next year may not be all that uplifting, relative to 2017, there are plenty of factors that will work to keep a floor under housing demand.
“Although credit polices are likely to remain tight, mortgage rates will remain low in 2018, providing a positive lending environment for those who are able to secure credit.
“Regulators and policymakers will be encouraging households who hold high levels of debt to reduce their exposure while rates remain low. Household debt levels are at record highs, a factor which has been called out by the Reserve Bank repeatedly as well as international institutions such as the OECD, BIS and IMF.
“With interest rates remaining low, the opportunity for households to pay down debt could come at the expense of broader spending on retail and discretionary items. Prospective borrowers, particularly investors, may find securing a mortgage won’t get any easier in 2018, with APRA restrictions on both investment-related credit growth and interest-only loan settlements remaining in place. Additionally, lenders are likely to be more cautious around lending in higher risk areas such as inner-city apartment markets where current and pending supply pipelines are substantial.”
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