23rd of May 2019
FBAA welcomes APRA rethink
The Finance Brokers Association of Australia (FBAA) has welcomed moves by the Australian Prudential Regulation Authority (APRA) to loosen its deemed serviceability requirements that have resulted in banks rejecting many reasonable loan applications.
FBAA managing director Peter White said times have changed significantly since APRA introduced guidance to authorised deposit-taking institutions (ADIs) to test residential home borrowers against an interest rate of 7.25 per cent, or well above a 2 per cent buffer over the loan’s actual interest rate.
APRA provided its guidance towards the end of 2014 when house prices were increasing and there was strong growth in investor loans.
“The end result was most banks were assessing applications against a rate of 7.25 per cent – way above the interest rate for owner-occupiers and investors.”
On Tuesday the prudential regulator gave the industry four weeks to respond to its proposal to remove the 7.25 per cent requirement, allow ADIs to determine their own floor rate levels while increasing the rate buffer from 2 to 2.5 per cent “to maintain prudence in overall serviceability assessments.”
“Brokers have a duty of care to always assess an individual’s capacity to afford the loan they want as part of our commitment to put customers first. But if the guidance is introduced it simply allows us to help more borrowers into properties that they can afford at a time of low interest rates and subdued house prices.
“When you combine the touted change in APRA guidance with the end of the election cycle and the possibility of the Reserve Bank cutting interest rates in June, there are some positive signs for our housing sector in the months ahead,” Mr White said.
“Just eight weeks ago I supported ASIC and APRA in their criticism of the big banks for blaming tough new interpretations of responsible lending regulations and the royal commission for the credit squeeze and delays in assessing loan applications.
“I will be watching the banks with interest to see who they blame next for their shortfalls after the new APRA guidance is issued.”
20th of May 2019
The FBAA looks to the future after Coalition re-elected
The Finance Brokers Association of Australia (FBAA) has congratulated Scott Morrison and the Coalition for their election win and vowed to work with them to ensure borrowers continue to have choice in a healthy financial services industry.
FBAA managing director Peter White said now is the time for brokers to take the handbrake off and hit the accelerator.
“The royal commission findings and the political fallout saw many brokers retreat into a holding pattern, driven by fear about their very financial survival and what that would mean for borrowers.
“Now that the election is over, I want to urge all brokers to commit to doing everything we can to grow our businesses now that banks know we are a force to be reckoned with.
“We currently provide around 60 per cent of home loans and I think brokers have a great opportunity to increase that to 70 per cent in the short to medium term.”
Mr White said the FBAA had worked closely with both the Government and Opposition in the lead-up to the election and had positive and professional support from both.
“On Sunday I communicated with both Labor and the Coalition, conveying thanks and best wishes from all brokers.
“We will continue to be highly engaged with politicians from across the country because our industry is a crucial one as we move into a new era.
“Brokers welcome the first home loan deposit scheme and other policies aimed at giving the property sector a boost. We will certainly do our part to boost competition and be ready to assist when the policy comes into play in January next year.”
13th of May 2019
FBAA cautiously welcomes first home buyer loan guarantee
The Finance Brokers Association of Australia says the Government’s proposed loan guarantee for home buyers, which will allow them to enter the market with only a five per cent deposit, is a very good initiative.
However managing director Peter White said the scheme’s success will be dependant on the banks which have over tightened credit policies following the royal commission.
“This will be great for first home buyers, although it’s worth noting that only about one tenth of the market will gain access to it,” he said.
While saving borrowers thousands of dollars in lenders mortgage insurance is a good outcome, Mr White cautioned that greater detail is needed to truly assess the benefits.
“There is a very good fundamental reason to have a deposit. If you can save for a deposit you can meet your monthly repayments, and this is what the banks look at.”
He also pointed out that with a falling property market, negative equity is a risk.
“We need to know the lenders’ credit policies around this, and they will have to step up to the mark and support it.”However he said overall, “if it can help stimulate people into buying their own home then that’s great.”
7th of May 2019
FBAA notes interest rate inaction despite solid case for cut
The Finance Brokers Association of Australia (FBAA) says many would-be home buyers will be disappointed by the decision of the Reserve Bank of Australia (RBA) to keep interest rates on hold.
FBAA managing director Peter White said the RBA board referenced employment figures strongly in their statement on monetary policy but also noted the impact of the changing dynamic on the housing market.
“The RBA has admitted that the demand for credit by investors has slowed noticeably as has growth in credit for owner-occupiers.
“Housing does play a major role in the health of the economy and while I understand inflationary pressure is subdued in part because of lower housing costs, we need a healthy and resilient housing market and we need accessible and affordable credit to achieve that.”
Mr White agreed with the RBA that borrowers of high credit quality can benefit from the current low mortgage rates, however that might not help first-home buyers or would be investors with limited credit history.
“As an industry, brokers are a saviour for many borrowers and I think the key role of brokers has been acknowledged by both sides of politics in the current election climate.
“I would have liked to have seen a rate cut but I firmly believe a reduction is still on the agenda in the coming months. What is also needed is certainty for brokers to ensure that we can continue to provide competition to the big four banks.
“We would like a commitment from both sides of politics to ensure the survival of the mortgage broking industry so that all Australians can continue to benefit from the services of a finance broker. We need the right policies to achieve that, not more uncertainty and deferred decisions.”
Letter from Scott Morrison
In a letter addressed to Mortgage Brokers, Prime Minister Scott Morrison says,
“Mortgage brokers are critically important for competition and delivering better consumer outcomes in the mortgage market.”
17th of April 2019
FBAA leader elected as chair of global broker movement
The International Mortgage Brokers Federation (IMBF) has elected Peter White, the managing director of the Finance Brokers Association of Australia (FBAA), as its inaugural chair of their board of governors.
Mr White continues in his role as the association’s managing director and has been part of the FBAA for 16 years holding positions including national vice president, national president, chairman of the board of directors and chief executive officer.
“I am honoured to be elected to this position with the IMBF which uniquely leads the broking industry in global co-operation and collaboration. At no time in our industry’s history has this been done.”
Mr White played a significant part in the birth of the federation which was launched in Canada late last year. A foundation meeting last month established the board of governors and elected office holders.
“The purpose of the IMBF is to lead industry associations around the world in collaboration so they can openly discuss their own journeys with regulation and how they may impact regulation in our own countries.
“The IMBF has already proven its worth in the FBAA response to the banking royal commission. The commission was told by a major bank that the Netherlands broker model should be implemented here.
“Our colleagues in the Netherlands quickly explained the failures of that model and our resulting submission saw both sides of politics, and the commission itself, reject the idea.”
“As well as broking topics the IMBF also discusses matters such as property markets, economies, regulations, global codes of conduct, rules of ethics, data research and best practice so that our members are informed like never before,” Mr White said.
The IMBF also established an international referral network allowing brokers to refer clients moving overseas (or those coming to Australia from overseas) to be looked after by leading professional brokers in the country they are moving to, in consultation with the client’s current local broker.
The board of governors include chief executive officers, managing directors and national presidents representing finance and mortgage broker industry associations from Australia, Canada, the UK and the USA. New Zealand, the Netherlands, and other countries from Europe and Asia are expected to join soon.
16th of April 2019
FBAA welcomes interest rate cuts by big banks and calls on others to follow
The peak body representing Australia’s finance brokers has applauded the Commonwealth Bank of Australia (CBA) and Westpac for giving in to market pressures and reducing fixed interest rates for new borrowers.
Managing director of the Finance Brokers Association of Australia (FBAA) Peter White said the downward moves are not surprising given increasing competition from lenders who were more competitive across the loan products.
“Late last month I called on banks to immediately cut interest rates as evidence increased that the next move by the Reserve Bank would be down. In March there was a sharp decline in short term bank funding rates and the smaller banks were already revising down.”
The moves by CBA and Westpac puts them ahead of the other majors for owner-occupiers and investors and improves their rating against some smaller lenders. Recent figures suggest 40 lenders have dropped rates since the start of 2019.
“The decisions are interesting because they put pressure on the other major banks to at least match them or risk losing more market share. That’s exactly why Westpac moved yesterday after the CBA.”
Mr White said there are many mixed signals in the finance sector at the moment but there is growing speculation that there may be at least one, or possibly two, interest rate reductions by the Reserve Bank this year.
“Consumers will be keeping a close eye on the big banks when the official rates do go down. I expect the banks won’t pass-on the rate cuts in full and that will lead to more confusion for borrowers trying to get the best deal.”
Close to 60 per cent of borrowers currently source their home-loans through brokers rather than going direct to lenders.
“There are very good reasons for that. The royal commission blasted the banks for their culture of greed and lack of transparency. Brokers have a large number of loan providers to choose from and they find the right deal to suit the individual circumstances of each consumer.”
3rd of April 2019
FBAA tips budget boost to result in bank crackdown
The Finance Brokers Association of Australia (FBAA) has welcomed the budget funding commitment enabling ASIC and APRA to respond appropriately to the recommendations of the royal commission.
FBAA managing director Peter White said it’s clear that a significant portion of the $404 million promised for ASIC over four years is for enforcement post the royal commission recommendations.
“Indications are little or none of this additional enforcement funding will be spent on actions against brokers, rather additional action to reign in the banks.”
Mr White cites an ASIC announcement late last year as evidence banks will be the focus. “The FBAA in December revealed that ASIC had reduced the cost to act as a credit representative for brokers from $104 to just $16.48 annually due to the decreased cost of enforcement. It is now indicatively being lowered again by ASIC going forward to $14.33.
“The total cost of legal enforcements against mortgage brokers has reduced to a third of the original cost in a little over 12 months, and now further again and that’s because brokers are doing the right thing by clients.”
However Mr White has strong reservations about the new task force to review brokers remuneration in three years.
“We will work with the new task force but only as it acts as a system of checks and balances and to ensure the model remains commercially sound and in the best interest of borrowers. After years of uncertainty we will not support a review which again puts in doubt the continuity of broker commissions and the ability of a broker to earn a reasonable income.”
He said the FBAA welcomes the move to provide the Australian Financial Complaints Authority with additional funding to assist those with historical eligible financial complaints. The number of financial complaints against brokers is minimal – approximately 0.5 per cent of the total – while complaints against banks have skyrocketed.
Overall, Mr White said he would have liked to see the budget provide more assistance for struggling homebuyers, particularly given the declining home values in some areas combined with persistent global uncertainty.
“The government, and all major political parties, must examine what they can do to stimulate the housing market, not suppress it and that includes any change to negative gearing and capital gains tax,” Mr White said.
1st of April 2019
Big banks urged to cut rates now
The peak body representing Australia’s finance brokers has urged the major banks to stop talking up the credit squeeze and start helping borrowers by cutting interest rates, thereby following the lead of smaller banks.
Managing director of the Finance Brokers Association of Australia Peter White said ASIC chairman James Shipton was right to criticise banks at an industry summit on Wednesday.
“Mr Shipton has called out banks for blaming a credit squeeze on tough new interpretations of responsible lending regulations when the laws have been in place for more than a decade.”
The ASIC chair reportedly told banks to ‘lean in’ to their obligations saying he was unimpressed with industry reluctance to comply with long-standing laws.
“The big four banks cited increased costs when hiking rates months ago and just this week some bank leaders have tried to blame the royal commission for the credit squeeze and delays in assessing loan applications, claims APRA Chair Graeme Samuel called ‘a load of utter nonsense.’
Mr White said banks are still blaming everyone else for their shortfalls, despite ASIC forecasting increased court action against them partly because of alleged breaches of the Corporations Act, which demand services are provided “efficiently, honestly and fairly”.
He also pointed to a sharp decline in short term bank funding rates as the latest evidence supporting rate cuts.
“Smaller banks are already cutting rates and some economists are predicting two official rate cuts this year with the Reserve Bank moving to a neutral bias amid concerns about the slowing global economy and the declining housing market.
“The first official rate cuts of 2019 may be here soon, but going by history, I suspect the banks will protect their massive profit margins by refusing to pass on any cuts in full.”
Further evidence of the dominance of the big four banks came recently when many of the smaller banks, including Bank of Queensland, Bendigo Bank and Adelaide Bank warned of weaker earnings and challenging conditions.
“In the ongoing debate about the reforms impacting mortgage brokers there has never been a more crucial time for competition in the marketplace.”