Changing lending climates - How will the brokers reinvent themselves?

Hi All,

There has been a lot of talk of lending rules changing etc and the impacts on borrowers. This will for sure impact the business for the brokers as well. However no body has raised how the brokers will need to differentiate themselves? Surely, there would be a need to think creatively and certainly brokers would need to work hard to differentiate themselves from the average. Especially those who are on Somersoft looking after savvy investors.

I'm sure it would push people to think outside the box rather than put loans through with the same ease as before. It would also mean, greater focus on what the clients want to achieve and not just your average run of the mill snacks.

Looking for the brokers to provide an input.

This should generate some healthy competition too! Just to add savvy investors like a 'can do' attitude.

Regards,
MsAli
 
I expect a down turn in broking clients, but will concentrate on squeezing as much as possible out by concentrating on structuring issues.

Last time this happened there was a bit of a down turn but things go on as per normal - just at a slower rate.
 
we have been preparing for this "sow down" for the last 1 year...anything that goes up must come down....

Can't rely on just the top 9 banks ( Big 4 + macq + Suncorp + St George etc..) ..there's over 80+ banks in Aus ( Authorized Deposit-taking Institutions (ADIs) ) - a big chuck are investment banks like investment bank of Japan/ bank of Mitsubishi/ Credit Susie and also credit unions.

Brokers really need to think outside the square and get connected with credit unions/ smaller banks/ non-banks/ investment banks/ private banking/ private funds and overseas banks.

The more banks = more options = more solutions = more pathways.

Regards
 
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It's not so much that we need to reinvent ourselves I don't think - more that the way we plan has to change. Immediately, it means looking much more closely at lenders who didn't get a look in before but are now mighty useful, and finding out exactly how they can work for our clients - and importantly where they won't work.

Strategic thinking is key - if what was planned for won't work anymore within the new environment, finding a new way forward and pinpointing ways to achieve that is really important. It's just a change of direction, not necessarily the end of the road.

It's like doing a puzzle where the pieces have just been played with by a 2 year old - things don't quite fit the way they used to, they may not look exactly as we expected but the end result can still be a good one - and more satisfying due to the challenge. :)
 
we have been preparing for this "sow down" for the last 1 year...anything that goes up must come down....

Can't rely on just the top 9 banks ( Big 4 + macq + Suncorp + St George etc..) ..there's over 80+ banks in Aus ( Authorized Deposit-taking Institutions (ADIs) ) - a big chuck are investment banks like investment bank of Japan/ bank of Mitsubishi/ Credit Susie and also credit unions.

Brokers really need to think outside the square and get connected with credit unions/ smaller banks/ non-banks/ investment banks/ private banking/ private funds and overseas banks.

The more banks = more options = more solutions = more pathways.

Regards

Great advice here Mick - the solutions of yesterday aren't the same as the solutions of tomorrow (literally speaking, 9am with Macquarie!).

I think a big part of it for brokers is being aware of what is happening in the market, not only today, but what can happen in the future. I imagine treating loans as a transaction by transaction process won't work with the growing viability of online lenders now. Part of the service is structuring and being an expert on whats happening in the marketplace. This adds real value to clients looking to build portfolios during uncertain financing environments.

Cheers,
Redom
 
Hello,

Great post but in business we most always evolve, change and always improve or else fail.

Yes these changes are going to create opportunities for sure :) lazy brokers and not customers focused brokers are going to find it hard.
 
I'm not too bothered by the changes - just need to work with them. It's not the first shake up to the industry - and it won't be the last.

Cheers

Jamie
 
I also think only a very small proportion of the broker community is effected by these changes. Your standard run of the mill broker is doing deals on a PPOR or a single IP. Yes even then it is harder but not so much compared to the brokers on SS.
 
Its also educating your client a bit - not all brokers run the same show. Some brokers only do loans. Others do loans, commercial, EF, Planning, Accounting, property sales etc under one roof. So it depends on what the client wants and if you can handle that transaction or you lose on it.

Eg - you look at a broker/planner/whoever selling a client a rental property on top of the loan. The property commission can range from 2-6% on average if straight from a developer (which I should think they'd be disclosing).
 
It's all about adopting the environment.

As Jessica said, it is not the end of the road.

It's about how to find a way to offer clients best possible lending solution.
 
I don't think brokers need to "reinvent themselves". Investigating alternate lenders adjusting strategies slightly to meet the new criteria, it's not a big deal. Compared to some of the changes over the last decade I think what we're seeing right now is hardly a ripple.

Firstly the affects of all this aren't that significant for the majority of borrowers out there. First home buyers, up graders, first or second IP purchasers the changes will have a fairly negligible affect if any.

Beyond these groups, I think it's going to increase the demand for many brokers. Borrowers dealing exclusively with their mate at the local branch for their portfolio might now find they can't get more finance via that channel, so they go see a broker for more options.

The brokers that will be most affected by these changes are those that have geared up specifically to meet a specific niche. There's plenty of large firms that are literally 'chop shops' for foreign investment. Then tend to write loans with only one lender and as that lender tightens they'll probably just find a new lender. As foreign investment cools they'll retrench staff. Plenty of others weren't really in the investment space 2 years ago but have seen the demand increase, they don't have the experience to understand real strategies around investment lending. These are the brokers who'll experience the most pain.

The other question of course is what are borrowers going to do? 90% lends are getting tougher and given that most lenders come back to 2 or 3 mortgage insurers who credit score, there aren't as many options out there as there are lenders. Brokers extending their panel of lenders isn't going to solve all challenges. In many cases it's the borrowers who are going to have to reassess their strategies and reinvent themselves.
 
In many cases it's the borrowers who are going to have to reassess their strategies and reinvent themselves.

This hits the nail on the head. As always, the role of the broker hasn't changed with the latest policy adjustments - it makes the role even more important as the chances of stumbling your way successfully through the lending market has significantly reduced for those looking to build an investment portfolio.

Businesses need to adapt and evolve to stay competitive and relevant - thankfully in this profession one of the primary functions has been to always adapt and evolve our strategies to get clients finance over the line - so there is no culture shock.
 
Do the banks have greater freedom in terms of their serviceability model if the LVR is under a certain level or will it be equally restrictive at all levels?
 
Do the banks have greater freedom in terms of their serviceability model if the LVR is under a certain level or will it be equally restrictive at all levels?

Not at this point, they're staying fast on their new policies. As the environment changes I expect they'll relax their rules somewhat for low risk clients.
 
At the end of the day, I can't get away from the thought that the banks are responsible to their shareholders to increase the share price &/or the dividends they pay out. They can?t do this if they stop lending and thereby making arbitrage between the margins they borrow at and lend out at.

So I think this too shall pass. :)
 
Like REAs brokers come and go with the market ups and downs. The good ones always shine. Some emerging young guns may struggle and others will just be strong. There are some people who can just sell and others who don't need to sell. I would think the recent changes make it a better proposition to seek expert assistance rather than calling your own bank and expecting them to look after you.

There will always be buyers and sellers and refinancing.
 
The changes to lending criteria put forward by a lot of the banks, are all of the changes actually forced through by APRA or is it the banks trying to act as first movers before the regulators actually enforce further changes?

Curious that although banks are making changes to lending criteria they are still very competitive on rates that are fairly low margin for them.
 
The main effect will be on multiple property investors where servicing will be far tighter than previously, so different strategies will be needed to build a property portfolio, unless an investor has very high income.

We, as brokers, will start to use more non-banks who may not be subject to such policy changes and have an even greater role in educating clients as to new purchases so they can show servicing capacity.

Some of the spin doctoring that APRA is going on about is a disgrace and simply at odds with the facts. It will be interesting to see in six months as the major and second tier lenders lose market share and growth how they will react. As has been said, even though it seems to be a simple profit grab by lenders using rate differentials for investors (let alone not passing on the full RBA cut) longer term it will bite.
 
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