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Year in review: Cracking a complex market

James Mitchell 25 minute read

The resilience of the broker channel is a beautiful thing. In a year of increasing uncertainty and regulatory pressure, the third-party channel managed to turn complexity into opportunity and ultimately bolster the value proposition of this growing sector

This time last year, The Adviser reflected on a major milestone as broker market share surpassed 50 per cent for the first time in history.

Brokers became a force to be reckoned with in 2014. It was a successful year for third-party banking, set against a backdrop of growing ambiguity as the Financial System Inquiry launched grenades of uncertainty in its interim and final reports.

A number of significant regulatory changes were announced at the end of 2014 that had a major influence on the mortgage market in 2015. The full impact of these changes are still being felt across the industry.


The Adviser had a close eye on APRA’s crackdown on investor lending as early as October 2014, when the industry was still in speculation mode about what action, if any, the regulator would take.

AMP Capital chief economist Shane Oliver and CoreLogic RP Data research director Tim Lawless both predicted that investor mortgage rates would rise.

Fast forward 12 months and the major banks have hiked their rates more than once, one bank stopped lending to investors altogether (and has since re-entered the space) and brokers are still coming to terms with almost daily pricing and policy changes.

Meanwhile, lenders have continued to invest in the third-party channel. A number of new players entered the broker market in the last 12 months, proof that loan writers are central to the mortgage distribution strategies of Australian lenders.

Some will remember 2015 as a year of momentous change and increased complexity for the Australian mortgage market. We like to think of it as the year when brokers harnessed that change to position themselves as the trusted advisers of their clients.


As regulatory pressures continue to drive pricing and policy changes from the banks, more and more Australians will look to brokers for guidance.

The crackdown

To fully comprehend what went down in 2015, it is important to review the regulatory action taken at the end of 2014.

On 5 November that year, APRA published APG 223 – the Prudential Practice Guide for Residential Mortgage Lending. This 23-page document summarised prudent lending practices in residential mortgage lending, including the need to address credit risk within the ADI’s risk management framework, sound loan origination criteria, appropriate security valuation practices, the management of hardship loans as well as a robust stress-testing framework.

On 9 December 2014, APRA and ASIC announced a mortgage market probe, including a widespread investigation into interest-only loans, high LVRs and investor loans.

The prudential regulator noted that it would be reviewing bank lending practices in the first quarter of 2015 and, where banks were found to not be maintaining a prudent approach, may institute further supervisory action.

On 12 May 2015, NAB-backed funder Advantedge became the first group to reveal a two-tiered pricing system by announcing an additional discount to its owner-occupied loans.

This price differentiation would become characteristic of the home loan market for the remainder of the year.

Advantedge general manager Brett Halliwell explains that over 2015, the mortgage market was hit with three big regulatory forces all at once. “One was APG 223, the second one was the investor cap, and then the third one was the capital requirements,” Mr Halliwell explains.

“Brokers were really having to cope with three simultaneous changes, which really meant it was a dynamic market with an awful lot of changes coming on board within a relatively short period of time.”

The fallout of those changes came thick and fast. From June, the market was hit by a plethora of announcements from banks: increases of up to 47 basis points on investor home loans, higher rates and serviceability criteria for interest-only loans, maximum LVRs on investor loans and other credit policy changes.

AMP Bank subsequently announced in July that it would no longer accept new or assess existing investor loan applications in response to APRA’s crackdown on investor lending.

In an effort to keep brokers abreast of the changes, The Adviser partnered with NAB Broker and Advantedge in August for a national roadshow. Under the heading ‘Knowledge is Everything — Making Sense of Industry Changes’, the roadshow rolled across the country from 18 to 26 August.

In addition to outlining what had already happened from a regulatory standpoint, the discussion covered further changes set to affect the lending market into 2016.

Market distortions

By September, the market was beginning to see signs that a two- tiered approach to lending was creating distortions, the first of which was a more competitive dynamic in the owner- occupier space.

As mortgage holders became aware that they would now be paying more for a mortgage as a landlord than they would as an owner-occupier, the banks were inundated with customers eager to switch out of their investor loans and into an owner-occupier loan with a lower interest rate.

CBA’s general manager of broking, Sam Boer, told The Adviser back in September that at its peak, Australia’s biggest bank was seeing a couple of hundred requests per day from customers reclassifying their home loan.

Around the same time, St. George Bank’s head of credit, Rob Love, admitted that the bank had to implement new procedures for dealing with a similar influx.

On 2 November, Westpac highlighted the impact of its pricing and policy changes in its full-year profit results. It noted a significant level of switching to owner-occupier loans as borrowers correctly classify the purpose of their loan, a trend the major bank expects to continue.

This shift caused quite a stir with the regulators. APRA, the Reserve Bank and the Australian Bureau of Statistics are now looking at a thorough investigation into the quality of the home loan data of Australian banks.

Speaking at the Finsia Regulators Panel in Sydney on 5 November, RBA deputy governor Philip Lowe highlighted that recent problems with the data relating to banks’ owner-occupier and investor housing loans have complicated the central bank’s understanding of what is happening in the housing market.

Over the six months to October, the RBA observed “very large upward revisions to the value of investor loans outstanding, with offsetting downward revisions to owner-occupier loans”. Mr Lowe noted that material revisions had been made by more than 10 institutions, including two of the largest lenders. The cumulative effect of these revisions increased the stock of investor credit outstanding by around $50billion or 10 per cent.

While the reasons for some of these earlier errors have been identified, MrLowe was concerned that other reasons remain unclear and lenders have not been able to provide comprehensive back data.

Overall, the RBA appeared disappointed and concerned about the lack of accuracy in the banks’ mortgage data.

Rate hikes

On 14 October, Westpac announced a 20-basis-point increase to its variable home loans for both investors and owner-occupiers. The primary reason for the hike, according to the official line from Westpac, was additional capital requirements.

A week later CBA joined the game, announcing a 15-basis-point rate hike. NAB followed shortly after, as did ANZ. 

By the final week of October, the majors had effectively priced themselves into a league of their own. Brokers were crossing their fingers in the hope that the challenger banks wouldn’t yield to the temptation to lift their rates too. But one by one, many of Australia’s regional banks (and a handful of mutuals) followed suit.

The RBA left rates on hold on Melbourne Cup Day the following week. Governor Glenn Stevens commented on the out-of-cycle rate hikes in his monetary policy statement. The long and short of it was the RBA wasn’t too bothered by what the banks did with their rates, as they are still so low that any marginal rises won’t materially impact on consumer spending.

Brokers turn uncertainty into opportunity

KeyInvest Lending Services broker Andrew Harrison says the changes in the market over the last 12 months have been “fantastic” for hisbusiness. 

"The organic growth of my business has been incredible since the changes began in May... I positioned myself to take on the changes in investor lending and APRA intervention as a positive opportunity to bring my skills to market,” he says.

Over 80 per cent of the loans Mr Harrison negotiates are mortgages for property investment.

Sophisticated investors with large property portfolios are now seeking M rHarrison out as a strategist and specialist in investor loans at a time when other loan writers are battling to keep up with an increasingly complex market.

“The demand for my advice and services has increased and this is happening through my clients talking about their experiences with their work colleagues, friends and families,” he says.

Mr Harrison says his three decades of experiencing the ups and downs of the economy have led him to roll with the punches and embrace change, noting: “The one constant in my career has been change and the only thing that is guaranteed in future is that there will always be change, so why not embrace it.”

The ultimate winners

If change was the central theme of 2015, perhaps 2016 will be the year of opportunity.

As uncertainty in the lending landscape proliferates, the demand for quality mortgage brokers as trusted advisers shows no signs of diminishing.

Loan Market chairman Sam White says 2015 will remembered as a year when the mortgage broking industry became entrenched in the financial services ecosystem in Australia.

“Seeing the majority of loans written through brokers is recognition of the value proposition that brokers bring to consumers,” Mr White says.

“Using a mortgage broker is now well and truly how consumers seek finance. APRA’s product and lending criteria changes have meant it’s more important than ever that brokers are involved."


AFG flexes tech muscles

It was a big year for AFG. The group made history when it listed on the ASX in May and proved that it was a force to be reckoned with in the technology space. The aggregator won Best Technology Platform and Broker Marketing Platform of the Year at the 2015 Australian Broking Awards – the second time in three years that AFG took out the technology gong.

“I think we’re seeing fantastic innovations… bringing mobile technologies to our brokers to give them a new form to be able to perform their role,” says Mark Hewitt. “Technology is going to be the way we interact. You look at people of [younger] generations: their whole method of communicating is via technology, so we’ve got to make sure that our brokers are on that path.”

Mr Hewitt says AFG is focused on keeping brokers fully informed of rate movements and other industry news.

“At the moment, we’re sending 300,000 communications out a month,” he notes, adding that by providing this vital information, brokers face less time pressures and enjoy more face-to-face time with clients. One ABA judge noted the benefits articulated by the brokers showed the great value AFG provides.

Broker writes $11.2m in five months, thanks to LinkedIn

One young finance broker is using social media so effectively he is winning millions of dollars in business. Glynn Bruce of Chifley Securities said he now wins 50 per cent of his loans through LinkedIn. Mr Bruce, 27, says he has written $11.2 million worth of loans through LinkedIn since Chifley Securities launched in November 2014. His LinkedIn page has 2,500 followers and a database of 5,500 people.

“It is really quite simple to operate once you get comfortable with social media, which allows us to have constant contact with potential borrowers and lenders, providing tips and examples of how people can improve their financial position”, Mr Bruce says, adding that he recently secured a $6.7 million refinance at a rate of 11 per cent through the use of the technology.

Discovery Finance Group director Jayden Vecchio is another young broker riding the social media wave, with around a third of his loans written through online mediums, many of which come through Facebook.

“People post positive comments which are then seen by others in my network as well as theirs. Compare this to being thanked on the street in person – no one really sees that feedback.”

Brokers invest thousands in client-focused app

Alan Heath, principal of Mortgage Choice Brisbane CBD, launched his own mobile app ‘Ask Alan’ designed to give customers expert advice on how to secure their home loan.

“They can contact me 24/7, read about issues of importance, ask a question, watch videos on different topics, calculate repayments and find related trusted services,” he says.

“This, to me, is the future, and our business is there now,” he says. “I have a business belief that I need to be in someone’s thoughts when they are ready to make a decision. To be there, I need to have created value in the ongoing relationship.”

Alliance Mortgage Solutions also uses mobile technology to improve its business, with director Eric Cui saying he uses WeChat to generate referrals and provide potential and existing clients with real-time updates on products and services.

WeChat is a social networking app for mobile devices that lets users communicate through text and voice messaging and share photos, videos and documents.

“Nearly 80 per cent of our clients use WeChat to look for updates to product promotions and market information,” says Mr Cui.


It’s been a mammoth year for white-label lending. Advantedge general manager Brett Halliwell looks back on a year that saw the group grow its footprint with five key partnerships

Q: What were some of the highlights of 2015 for Advantedge?

For us, 2015 was a phenomenal year. I think the key call out there would really be the growth of our footprint to brokers that have access to an Advantedge-funded white-label product. It's increased from about 35 per cent of the market to 85 per cent and that was through the roll-out of white-label products with AFG, Connective, Loan Market, Astute and LJ Hooker.

I think the pleasing thing has been a really fast take-up in some incredibly strong volumes there and I think what that really demonstrates is that brokers are certainly aware of the benefits of white label. I think that fact has really allowed us to gain traction very quickly.

Q: Why do you think white-label products have been so successful in 2015?

I always put that down to several factors in terms of what brokers are looking for. The first one is competitive prices within the market and the right products that meet their customers’ needs.

The second is service, and that comes down to on-road support from the BDM team. While there's a dedicated BDM team, we also service from the operations team. The other comes down to relationships. It's having our management, our BDM team and our broader business forming deep relationships both with the aggregators but more importantly with the brokers, so that we can understand and work together.

Q: Do you see any challenges ahead with the new capital requirements given Advantedge's ownership?

Advantedge is a fully owned subsidiary of NAB and a great benefit we have out of that is having access effectively to wholesale funds from NAB. Our parent is very happy with the economic returns that are generated out of white label.

It's been very successful in generating mortgage volumes for the bank and I think it's fair to say that NAB is certainly looking towards more mortgages from the third-party channel and confidently looking forward to Advantedge being able to deliver that.


Australia’s largest broking group had another stellar year in 2015, taking out six gongs at The Adviser’s Better Business Awards including Best Branded Office in NSW (Aussie Parramatta). The group also took home the award for Major Brokerage of the Year – Franchise at this year’s Australian Broking Awards. Aussie CEO James Symond reflects on a year of achievement...

Aussie Home Loans had a record year in the 2015 financial year, posting a record $20 billion in home loan settlements across the group, including $16.8 billion through our Aussie branded channels of mortgage brokers and franchise stores,” Aussie CEO James Symond says.

“We achieved all of our ambitious growth targets for the year, with our retail and mobile broker channels both reporting record levels of lending volumes.

“Aussie also reached an important milestone in our 23-year history, employing our 1,000th mortgage broker, while we have just opened our 175th purpose-built store. The mobile mortgage broker channel continued its strong run, settling a record $600 million in one month (June 2015).

“We and others in the industry saw borrowers flocking to property during the current historic low interest rate climate, which I believe is set to continue for the foreseeable future. The Aussie Group loan book, including nMB, is nearing $70 billion and Aussie’s branded home loan products are currently the most popular from its range of hundreds of home loans on our panel of 19 lenders. “The group is also on track to increase its number of purpose-built Aussie stores across Australia from 175 to 200 and grow the number of mortgage brokers in the group from 1,300 to 1,460 by July 2016.

“We have again set ambitious growth targets this financial year in retail, mobile and also in wholesale through nMB, and the 25 new Aussie stores will be key engine rooms for our growth.

“In the current year, we have seen a 16 per cent jump in demand for home loan refinance, with savvy savers now making up 35 per cent of our loans. These refinancers are saving an average of 0.71 per cent on their home loan interest rates or over $86,000 on a 30-year loan when they refinance.

“This year sees us investing heavily in technology and customer service to improve customer experience and our own productivity, with one example being our establishment of an Aussie Customer Service Centre in-house in October. Ensuring greater customer access to the Aussie brand and service is the goal, with the majority of new Aussie stores being targeted to open across outlying city suburbs of Sydney, Adelaide and Melbourne, as well as regional areas of Queensland," he says.


Australia’s non-majors lenders were aggressive in their attempts to boost broker market share in 2015. BOQ and MyState were just two of these lenders that revealed their ambitious third-party growth plans for the year ahead


When Bank of Queensland (BOQ) announced its full-year profit results in October, the regional bank highlighted the importance of brokers and revealed its plans to grow its third-party presence.

The lender has BDMs supporting more than 2,500 accredited brokers, who accounted for 23 per cent of the group’s total mortgage settlements in August.

BOQ is looking to increase its third-party footprint to an anticipated 4,000 brokers by the end of the 2016 financial year – a 60 per cent growth target.

The majority of existing BOQ accredited brokers are based outside of Queensland (83 per cent). The number of broker aggregators was also widened with the inclusion of Finsure, Loan Market and Beagle Finance in 2015.


Speaking at MyState Bank’s AGM in Hobart in October, chairman Miles Hampton outlined the significance of the third-party channel to the group’s mortgage distribution strategy.

“We have re-engaged with the broker market,” he said. “The reality is that two-thirds of all new loans written by the banking sector in Australia are being introduced by the broker network. In our case, 70 per cent was broker-introduced.”

Mr Hampton said this is hardly surprising given the relatively low growth through direct channels in MyState’s traditional markets of Tasmania and central Queensland. Tasmania-based home loans represent 60 per cent of the group’s loan book compared with 66.8 per cent a year ago, with Queensland-based loans comprising 16.4 per cent.

“Increased reliance on broker-introduced business has seen loans to NSW and Victorian borrowers grow significantly,” he said.



Bernie Lewis joins Choice: South Australian mortgage group Bernie Lewis Home Loans selected Choice as its aggregator after operating directly with lenders for almost 30 years 


Suncorp Bank increases trail commissions


Pepper increases upfront commissions by 30 basis points


Firstfolio rebrands and restructures leadership team


RBA cuts official cash rate to 2 per cent

22 MAY

AFG lists on the ASX


Pepper lists on the ASX


Bank Australia enters broker channel: Bank Australia partnered with mortgage aggregation group AFG to provide home loans through brokers. The partnership with AFG is Bank Australia’s first entry into the broker market


Beyond Bank enters broker channel: South Australia based mutual lender Beyond Bank entered the broker channel in an effort to boost its mortgage distribution capabilities. The mutual has partnered with leading aggregation groups including AFG, PLAN, Choice, Loan Market, eChoice, Vow, Ballast and Outsource Financial


Raine & Horne expands financial services offering: Raine & Horne Financial Services has undertaken a major brand refresh as it looks to expand its mortgage broking, insurance and superannuation businesses. The group’s financial services business will now be called Our Broker and will continue to offer residential, commercial property and business loans from a panel of more than 30 lenders. Our Broker also plans to develop the RhSuper offering and develop its home and contents and landlord insurance offerings. The firm will also offer income protection, mortgage protection, business insurance products and motor vehicle insurance. Former Vow Financial state manager for NSW and ACT Dawn Inanli was appointed general manager.


REA Group reveals plans to enter the home loan market: REA Group, the parent company of online property listings site realestate.com.au, hired mortgage industry figure Andrew Russell to lead the group’s push into the financial services space. Mr Russell was responsible for launching Virgin Home Loans in Australia and more recently was general manager of third-party and product distribution at Mortgage Choice. As executive director of the newly launched REA Financial Services, Mr Russell will work on the opportunity that REA Group sees in the Australian mortgage market, particularly around how the group can leverage realestate.com.au.

2015 Honour Roll


Broker of the Year and Finance Broker of the Year: Greg Wells, Wells Partners/Mortgage Link Group 

Residential Broker of the Year: Justin Doobov, Intelligent Finance 

Major Brokerage of the Year – Franchise: Aussie

Major Brokerage of the Year – Non-franchise and Innovator of the Year: Home Loan Experts 

Aggregator of the Year: Connective 



Broker of the Year: Eric Cui, Alliance Mortgage Solutions

Rising Star: Conrad Turnbull, Flag Property Investment Services


Broker of the Year: Tony Fornano, Fornano Group Wealth Management

Rising Star: George Samios, Madd Loans


Broker of the Year: Tom Caesarowicz, Positive Lending Solutions

Rising Star: Marissa Schulze, Rise High Financial Solutions


Broker of the Year: Mark Davis, The Australian Lending & Investment Centre

Rising Star: Marshall Condon, Mortgage Choice South Yarra


Broker of the Year: Brendon Marshman, Opal Finance

Rising Star: Bianca Patterson, Momentum Wealth


Justin Doobov, Intelligent Finance

Mr Doobov is the managing director of North Bondi-based Intelligent Finance and wrote a staggering $685,475,197 in total volumes last financial year. That’s 763 loans in 12 months.


James Chatfield, Chatfield Consulting

WA-based James Chatfield of Chatfield Consulting was crowned the winner after a successful 2015 financial year that also saw him achieve ninth place in The Adviser’s Elite Business Writers list – a ranking of the top 50 mortgage brokers in Australia.


Aussie Home Loans






ING Direct


Industry leaders share their outlook for the year ahead, and what a year they are expecting 2016 to be!


We expect broker market share next year to get to 60 per cent of all new business. In the UK, that number is now 75 per cent and growing based on the increased regulation that has occurred in that market. Moving forward, there will be more competition between brokers for customers than there has been in the past. Our view is that customers will continue to expect more service from their brokers and those that invest in their customer value proposition will take share from those that don’t. Brokers will have expanded their business into new areas to service their existing customers. They will have communicated well to their existing clients and put effort into retaining these clients and their broker back book. Finally, we’ll see more consolidation happening at the broker level as more brokers choose to establish practices with infrastructure.


There is no blanket solution for brokers to continue business growth in 2016. Every broking business is unique – and strategies for growth need to be tailored to suit every business. Many businesses pursue diversification as the only path to growth when it may not be appropriate for their situation. Brokers should consider other pathways to growth – including expanding into new geographical areas, partnering with insurance or conveyancing firms or employing different tactics that target a different sort of customer. Each pathway to growth should be accompanied by a strategic plan that sets out a list of steps and goals
to keep you on track to reach your growth target.


One of the challenges next year will be whether or not we start to see the official cash rate going up. I would suspect that we will. I do not believe the banks will absorb any increase. Some may not pass it on in full, but I think the vast majority will pass on an increase directly through their lending. To me that has been expected for some time and is probably a bit overdue. The longer we delay this, the bigger the steps will be. At some point in time, we need to get some balance back as to what is economically sustainable over the long term with our interest rates. At the moment, we are at an extraordinarily unprecedented low rate environment. Commercial common sense says it can’t stay there, so at some point it has got to go up. Little steps, but corrective steps to get a more balanced and sustainable environment over the long term. The switched-on brokers will thrive in the future by being the ones to guide their clients through the complexity.


Brokers are very busy running their businesses, but the biggest challenge is spending time with their existing customers first and then what comes o the back of that is more referrals. So the exciting thing about
2016 is that there’s so much happening in the marketplace, whether it is rate changes, FSI, things going around business insofar as business systems, growth in the business part of the economy, that there’s plenty for brokers to do and concentrate on. I think the challenge is for them to work out what they are going to focus on. Focusing on their existing client base first would be an enormous opportunity.


I’d see 2016 as further opportunity for the broking industry to cement its success. The broking industry now makes up the majority of home lending in the country and as the spotlight continues on our industry, if we continue to provide consumers with a fantastic experience and the right advice, that will continue to drive more consumers to the industry. I see 2016 as an opportunity to really showcase the quality that exists within our industry, which is not only positive for the industry but positive for consumers because we know when a customer sees a broker it results in a better outcome.

Our recent annual survey showed that 74 per cent of Choice members expect their own business to be stronger in the next 12 months than the previous 12 months. Only two per cent thought their business would be worse, so very strong growth focus and that’s really very much our support focus over the next 12 months. That means a focus on CRM, on marketing, and increasingly so on social media to help members cement social media into their business as well.

Year in review: Cracking a complex market
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James Mitchell

James Mitchell

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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