I personally handed a letter to the Prime minister of Australia
On Friday night 7th December 2018, I did something I have never done before. I personally handed a letter to the Prime Minister of Australia.
The letter below was written on behalf of my 15,000+ colleagues in the mortgage brokering industry and all the clients I disappointed this year because of the Royal Commission into Banking Misconduct.
On behalf of all mortgage brokers in Australia, I am sorry if you had your home loan aspirations affected by this Royal Commission. The good news is the mortgage brokering industry has banded together and started exerting pressure to find a middle ground where lending kicks starts again.
To all my colleagues in finance, if a humble mortgage broker in the suburbs of Sydney can find his way to the prime minister, may I encourage you to take up the call to arms from the MFAA/FBAA to contact your federally elected member. Feel free to to copy and paste the letter I wrote below.
Your clients need you, our industry needs you, Australia needs you.
PS – that really is box of Pannetonne I handed our prime minister!
Thank you for taking the time to read this letter.
My name is John and I am a humble mortgage broker working in Sylvania Waters, Sydney. I speak on behalf 16000+ mortgage brokers whom act on the dreams and aspirations of hundreds of thousands of ordinary Australians.
The Royal commission into banking has had unintended consequences on Australians. I thank you in advance for the opportunity to bring what’s happening at the coal face to your attention; the collateral damage that is now affecting jobs, the economy, people’s livelihood and now the mortgage brokering industry itself.
The Credit Crunch of 2018
The pendulum has swung too far. No one denies the need for the royal commission into banking, however good governance means we need to find a middle ground where banks start lending again. In 15 years of practice, I have never seen situations where customers with perfectly good credit history asking to refinance their loan and save $300pm and no longer qualify. They can afford their current expensive home loan, but somehow they can’t afford a cheaper mortgage. How does that make sense? When did the inquiry into misconduct in banking turn into styming Australians from getting a better a home loan, buying their first home, invest for their future, build their businesses; a lenders decision recently to approve a home loan came down to verifying household expenditure on pet food, another lender declined a first home owners application because of excessive use of uber eats, a client earning $450kpa is struggling to buy his 2nd investment property and doesn’t even have an owner occupied home loan.
The ramifications of the credit crunch of 2018 are now clear; NSW stamp duty revenue has been hit, car sales are down, construction and renovation activity is contracting and tenants are finding it increasingly difficult to find a place to call home. There are 72 places to rent in Hobart! Its now harder to find a rental property in Brisbane than it is in Sydney and Melbourne. Canberra has a .6% vacancy rate and 3% is considered a balance market.
The irony is that records show Australians are significantly ahead on their mortgages. The levels of mortgage delinquencies are at record lows. There are ample employment opportunities. Yet the regulators that forced an unprecedented level of forensic scrutiny of household income and expenditure have created a banking framework that is actually causing delinquencies to rise because fewer people are able to refinance. Eg Interest Only loans.
Ethical banking and assisting Australians with their mortgage needs need not be mutually exclusive. Regulators are creating a banking culture of “what can we find to decline this credit application”. This nation is built on visionaries and a can do attitude. Our regulators are stifling the aspirations of everyday Australians and we need your support to bring common sense back into lending.
Credit Products and Innovation
An unintended consequence of the royal commission and the regulators is the pull back by lenders in market segments of credit. Its nigh on impossible to help mums and dads buy an investment property off the plan in a SMSF. How many tenants are now suffering? How many jobs have been lost in the construction sector and the multiple flow on effects the construction industry creates in jobs? Reverse mortgages have disappeared. With it comes the lost opportunity to help our senior citizens to live in dignity, safety and health. White label home loan products are now been withdrawn from the market, eroding the opportunity for entrepreneurs to launch niche credit options not been met by the majors to help the drive the economy further. Innovation has been a hallmark of our financial services sector and its now stalled.
Mortgage Brokering “Fee for Service” will cost Australians.
Its a known fact the advent of the mortgage brokering industry has helped drive competition in lending and reduce the cost of credit on average by 2.5%. Smaller lenders have grown and innovation has flourished.
The royal commission is now seriously considering introducing a fee for service model for mortgage brokers. If this was to occur, the mortgage brokering industry will disappear and Australians will suffer. The “Big 4” have audaciously implied an apparent conflict of interest that is brokers receiving a commission for their services. The fact a fee for service model will claw back market share to the big 4 and save in the CBA’s case circa $200 million a year was not entered into. Rather naively, the royal commission think a first home owner in Caringbah, whom has struggled to save $60k to buy a $600k unit, has the funds to pay a broker $6k when there is a free alternative of walking straight into a Big 4 branch. The royal commission are suggesting that regional Australians earning $50k a year are going to pay a broker $4k to access credit from smaller lenders like ING that have no branch networks. They will walk into a free Big 4 branch network. The fact remains 56% of mortgages are now originated via a broker. Australians have decided they get better service, better terms and conditions going through a mortgage broker. The Big 4 are losing market share and this is their thinly veiled attempt to use the royal commission to undermine the industry and save money in the process. On behalf of everyday Australians and 16000 mortgage brokers, I humbly urge you to consult with the commissioner Honourable Kenneth Midson Hayne and other influential members of the banking regulator landscape to not be duped into a fee for service model.
Our lending environment helped build Australia. Please assist my colleagues and I to bring back a culture of “how can we make this credit application work”. Otherwise, my industry and I fear well intended but misguided regulation is going to cause a recession “we didn’t have to have”.