The confusion caused by the financial services royal commission and changing lending appetites will mean that this calendar year will be “the year of the broker”, an industry figurehead has suggested.
Speaking to The Adviser, Pepper's director for sales and distribution, Aaron Milburn, stated that he expected this year to be a boon for brokers as more customers seek alternative solutions to the major banks.
Noting that several major banks have stated they would be working on a more ‘simplified’ offering and were pulling back from some aspects of the lending market, Mr Milburn said: “Every customer is different, everyone is unique; that is the beauty of our world. Just because you don’t have a standard set of income documentation doesn’t mean you are any less worthy of a loan for your family than someone that does.”
The non-bank lender’s director for sales and distribution added that Pepper manually assesses every loan and has a suite of both full documentation and alternative documentation loans to help provide solutions for customers that may be falling outside of the bank’s current lending appetites.
Looking forward, Mr Milburn noted that the royal commission report is expected to be released in February but that the federal election in May could mean that it would be several months, if not years, before any recommendations that could impact the broking industry are passed into law.
Given the uncertainty on the horizon, and the changing appetites of the banks, Mr Milburn suggested that this would drive more borrowers to the broker channel.
Mr Milburn explained: “I think people will start to ask more questions this year. With the royal commission and people getting turned down by the major banks, that will drive more people into the broker offices to look for alternative sources of solutioning. Whether that be full doc or alt doc or car loans, or personal finance, I think this is the year of the broker. I’m going to call that. I actually think that 2019 is the year of the broker.
“If people view 2019 as a turbulent view ahead, they are missing that it is also actually a year of much opportunity. Because what does change cause? Confusion. What do people need when they are confused? A guiding hand. Who is the guiding hand? A mortgage broker.”
He added: “Someone told me [something] the other day that I thought summed our industry up perfectly; we have a very simple industry – find a customer, lend money, give the customer a great experience and a fair price. And who can do that? A broker. That sums up exactly what brokers do.
“I’d suggest brokers just keep doing what they are doing and take advantage of the confusion among customers. Because I think people are crying out for help."
Mr Miburn continued: “People don’t go to brokers because they think that they can get the cheapest rate. They go there to either have their internet research validated or they go there to have advice on how [to get a loan] and how best [to] do this.
“The brokers that are more educated in the changing landscape will be best placed to help their customers navigate through that and get the best loan for them and their family at that time. Not the best rate, but the best loan that fits that family at that time for their needs,” he said.
Mr Milburn added that Pepper will continue to provide education to brokers through the year, through events such as its Insights Roadshow as well as professional development days, coffee meetings and webinars.
He concluded: “I think we have a duty to help educate brokers and in turn their clients on what are the headwinds coming that are going to provide opportunities for brokers and how do we help support and maximise the output of those. CCR will be one, the royal commission will be another, as that will drive a set of recommendations for the government that comes in or remains in to put in place in time. I think open banking is another.
“I think we also can’t shy away from the 90-odd thousand interest-only loans that are going to roll off and how we help those customers. And I think there is going to be a bigger shift away from the major banks because of how they continue to view customers into the non-bank sector, such as Pepper,” he commented.
Annie Kane is the editor of The Adviser and Mortgage Business.
As well as writing about the Australian broking industry, the mortgage market, financial regulation, fintechs and the wider lending landscape – Annie is also the host of the Elite Broker and In Focus podcasts and The Adviser Live webcasts.
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