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Liberty reports 14% drop in mortgage originations

by Fabian Cotter12 minute read

Residential mortgage originations dropped to $1.7 billion in 1H23, the non-bank lender has revealed.

On Monday (27 February), ASX-listed financial services group Liberty Financial Group released its financial results for the six-months ending 31 December 2022 (1H23), indicating a slowdown in mortgage lending.

According to the group, its lending arm (Liberty) saw new originations fall to $1.7 billion during the half, down 7 per cent on the prior half and nearly 14 per cent on the prior comparative period (when it originated $2.02 billion in residential loans).

The group attributed the drop to "slower credit growth given [the] interest rate cycle", it explained.

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However, its drop in mortgages was more than offset by growth in the group's secured finance and financial services arms, it outlined.

Its secured finance includes motor finance and commercial finance while financial services covers personal loans (including those under the Moneyplace brand), small-to-medium enterprise (SME) loans, insurance, aggregation, investments and New Zealand real estate businesses.

Overall, the Liberty Financial Group Limited (LFG) reported a 6 per cent increase in financial assets to $13.2 billion and a decrease in statutory NPAT to $104.0 million, as a result of "not passing on all cost of funding increases to customers," it underlined.

Notably, the group raised the issue of a slight increase in arrears rates and the critical role brokers play in helping manage such, going forward.

Chief executive James Boyle said the result was “achieved in a period that continued to be unsettling for customers.”

“Importantly we were able to continue helping more people with their finances during uncertain economic times,” he said.

The CEO continued: “To date our customers have demonstrated tremendous resilience in successfully responding to rate increases.

“As interest rates rise, we will continue to actively work with our customers to manage the impact of higher repayment obligations,” he added. 

Helping customers as much as possible

The Adviser asked the CEO and CFO to what extent LFG can continue ‘cushioning’ customers from the full Reserve Bank of Australia (RBA)-induced higher interest rates in full, considering marketplace conjecture of there being at least another three hikes to go before the terminal rate is reached. 

“To your point about arrears starting to show, that's going to be worse if you don't do that [cushioning] because you're pushing your customers costs up by more,” they explained.

“There are no certainties in life and everything has to be considered on the merits at the time.

“So far, we've been very, very consistent…

“We've done a lot with people [to] help our customers as much as we possibly can in the economic circumstances,” they stated.

Asked if they expected the same percentage of arrears each month, going forward, they replied: “It is unknown. I suppose what we're saying is, we don't expect the economic environment to improve radically in the next six months and [if] anything we think it will be more challenging.

“We're very mindful of being there to help our customers - and it's not just about interest rates – that’s inflation, that's house prices.

“Customers by and large as doing it harder now than they have been for some time.

“We will be there to help them as we work through this economic cycle,” they outlined.

The crucial role of brokers

In terms of brokers playing a role with LFG in regards to customer communications and flagging issues early – in addition to the group’s text messages to remind customers of payment dates approaching and support on offer, Mr Boyle and Mr Riedel explained: “Brokers are absolutely critical in our engagement with customers [so that] they are now understanding of the environment.”

“We have exceptionally strong partnerships with the mortgage broking industry and we value that partnership very deeply.

“We work in consultation and in partnership with brokers when their customers have an issue.

“And we really appreciate [all the] feedback and connection that we get through the broking network to all of our customers.”

[Related: Diversifying outside mortgages boosted Liberty’s margin]

peter riedel james boyle liberty financial group ta blfr c

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