Did time speed up for brokers this year? (No, really)

With help from the MFAA, Australian Broker takes a contemplative look at the year gone by, the nature of time, and ways for brokers to approach the future – whatever it holds

IF YOU felt that 2023 whizzed by in a flash, you may not be alone. One theory about why time seems to speed up as we get older revolves around the fact that routine events tend to lose their novelty and make less of an impact on our memories. Riding something unusual like a roller coaster leaves a striking impression, but a daily bus ride is less memorable and seems brief in retrospect as our brains discount routine bus rides more than scary roller coasters. If this idea is to be believed, then perhaps it can be said that time moved a little faster for Australians in 2023 than in the three years prior. While the pandemic certainly accelerated change in terms of how people use technology, or think about their health, or engage with services such as those provided by mortgage brokers, the sheer shock of COVID-19 and how it upended lives made the roller-coaster years of 2020–22 seem to drag. In contrast, the past year – a relatively routine one without lockdowns, mass vaccination drives or record lending on the back of ultra-low interest rates – has in some ways restored a degree of normalcy to the everyday, which helped it fly by despite more subdued lending markets. In 2022, mortgage brokers were incredibly busy, and many were perhaps secretly looking forward to a quieter period despite concerns around how the economy would fare in the aftermath.

Even though Australian lending markets are now post-pandemic, the gradual process of weaning borrowers off ultra-low interest rates still means that there are a number of unusual phenomena in play – reminding us that the pandemic hangover is not over yet. “We saw over one million home loans rolling off very low fixed rates, secured in 2020 and 2021 when interest rates were at record lows, on to much higher variable terms,” says MFAA CEO Anja Pannek. There is still some way to go in this process: estimates show that around 40% of home loans taken on low fixed rate terms during the pandemic are set to expire by the end of 2023, and another 20% by the end of next year. Record levels of refinancing are resulting in most brokers being able to attract first-time clients. An MFAA broker survey shows that 95% of brokers in 2023 were able to attract refinancing customers who had never used a broker before. Pannek expects this trend to remain in place for 2024. “Interest rates will remain elevated in coming months, and with still more borrowers rolling from fixed to variable rates, I’m predicting more Australians than ever will seek out the services of a broker,” she says. Another unfamiliar problem not seen to the same degree since the GFC is loan serviceability. “Eight out of 10 brokers who responded to our survey told us that more, or considerably more, clients are unable to refinance now than [they were] at the beginning of the year, with the inability to meet serviceability being the number one reason,” says Pannek. This has led brokers to recalibrate and explore more flexible options for financially stressed customers.

Even so, inflation is sticky, and the ‘higher interest rates for longer’ school of thought still dominates economic debate. Sentiment at small-to-medium enterprises looks to have turned a corner, with the Fifth Quadrant SME Sentiment Tracker survey showing sentiment at its highest point since May 2022 and demand for additional finance over the next three months at its highest since July 2022. On the other hand, some observers are saying that business owners who can’t afford to take out a higher-interest loan are raiding personal

Established in 1980, the Mortgage and Finance Association of Australia represents over 14,000 members and contributes to a healthy, competitive mortgage and finance industry through advocacy, education and business-building support. Our finance brokers operate within a professional Code of Practice that supports the alignment of the retail mortgage market with investor and consumer trust and confidence. Together with our members, we work with the industry, regulators and government to help our members match consumers with mortgage or financing outcomes that meet their individual financial objectives.

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Anja Pannek

MFAA

Industry expert

Anja Pannek is CEO of the Mortgage and Finance Association of Australia. An experienced leader in financial services with over 20 years’ experience in the sector, she has a proven track record of leading successful businesses within the third party channel, including aggregator businesses and mortgage distribution for major financial services firms. Pannek thrives in complex and uncertain environments, and through her vast experience in financial services she has gained an exceptionally strong understanding of the challenges and opportunities facing the Australian mortgage and finance broking industry.

MFAA

Anja Pannek

MFAA

Industry expert

MFAA

Anja Pannek

Of course, how busy a mortgage broker is at any given time often depends on the prevailing economic conditions. While a recession appears off the cards, it’s fair to say that financial stress may remain high for a while, with both positive and negative data evident. On the one hand, inflation appears past its peak. Much media noise several months ago about the dangers of “the mortgage cliff” appears to have been misdirected, with any major surge in arrears yet to materialise, suggesting that borrowers are coping with the higher interest payments many have already rolled on to.

Other changes saw some unfair practices relegated to the sidelines. This year saw the winding up of the federal government’s three-year Term Funding Facility, which was introduced at the start of COVID-19 and underpinned the cashbacks offered by major banks to borrowers looking to refinance. Cashback-offer schemes – originally intended to compensate a borrower for the cost of switching lenders – are now disappearing, along with the market distortions they caused. The wider introduction of technology into the finance industry also continues at pace, even if it’s without the same do-or-die urgency of those first haphazard Zoom meetings held in 2020. The role of a broker has always been to bring choice and competition to the lending market and find the most suitable loan products for clients while providing support and guidance throughout the process. “What’s changed over the past few years is how brokers deliver this service,” says Pannek. “Today we know that many brokers connect with their clients virtually, whereas in the past face-to-face would have been the norm. Today there are technology platforms available for brokers to automate what would have once been a manual task.” There is no doubt the tech evolution will continue, particularly through such initiatives as the CDR (open banking). Brokers will need to learn how to handle these changes and adapt to client expectations as developments such as the use of AI alter existing practices yet again. “Further take-up and development of AI in brokers’ offices will create productivity uplifts and allow brokers to focus efforts on customer interaction and service – that highly valued human interaction and expert guidance that customers are seeking,” says Pannek.

savings to keep the plates spinning and supplement household budgets amid continued cost of living pressures. National accounts data shows that the household sector drew down on deposit assets for the first time in 16 years in June. At the same time, the household savings ratio has declined to 3.2%, the seventh consecutive fall, taking it to the lowest level since June 2008. This is in stark contrast to the phenomenal savings that Australians squirrelled away in 2020 and 2021. The latest data clearly shows that households are now consuming more than can be covered by their gross disposable income – a trend that is unsustainable over the long term. “No doubt the government and regulators will be watching closely to see how borrowers weather the coming months,” says Pannek. Time will tell, but as many people learned during the pandemic, it is sometimes best to focus on the things you can control and simply roll with the punches for everything else. But with a more normal schedule and the pandemic in the rear-view mirror, don’t be surprised if the months ahead speed by as fast as 2023 did. The end of the year is an ideal time for brokers to consider their plans for the future, as well as replenish their mental reserves. Pannek, as leader of the peak industry body, will be setting an example in that regard. “I’m planning on spending time at home in Brisbane with family and friends,” she says. “I always find the year-end break a great opportunity to unwind and take stock of where I want to focus – from a personal, including health and wellness and also work perspective for the next year.” She adds that 2023 was really the first time in six or seven years that the industry has had enough time to catch its breath, look forward and consider its future. The MFAA was able to use some of that time dividend to make its first pre-budget submission to the federal government, for example, as well as secure a stop action from Revenue NSW with a commitment that it would not commence any new audits connected to aggregators in regard to payroll tax. We can hope that 2024 has more in common with 2023 than the pandemic years in terms of disruption to familiar routines – but that means that time will continue to stealthily slip by. Brokers should put it to good use after managing to survive (and thrive) through the lengthy but history-making early part of the decade. Pannek says that regardless of what happens, there will always be one constant the market can count on: “Brokers will be there for their clients in the same way they have been through this year and the preceding years.”

Barry Saoud joined Pepper Money in July 2021 as general manager, mortgages and commercial lending and is responsible for its strategic direction and operating performance across product, credit and settlements sales functions for Australia and New Zealand mortgages, commercial loans, personal loans and direct sales. With over two decades’ experience in financial services, Saoud has worked in numerous areas across legal, company secretary, sales and product management roles with the likes of Aussie Home Loans, GE Capital, HSBC and Norton Rose Fulbright. Saoud is a passionate leader with proven ability to grow businesses and exceed targets through innovative strategy and effective execution.

Pepper Money

Barry Saoud

Peter Vala has extensive experience in residential, commercial and development finance. He specialises in strategic implementation, leads the Thinktank relationship manager team, and works closely with brokers and aggregators.

Thinktank

Peter Vala

John Mohnacheff is Liberty's ebullient and charismatic group sales manager. With over 30 years of insurance, banking and finance experience, he is committed to improving the sales habits and disciplines of the entire group sales team. Before joining Liberty, Mohnacheff held executive roles at Westpac and Bank of Melbourne. He has a Bachelor of Business and a Marketing Master’s from the University of New England, and a Postgraduate Diploma in Organisational Behaviour from the University of NSW.

Liberty

John Mohnacheff

“Interest rates will remain elevated in coming months, and with still more borrowers rolling from fixed to variable rates, I’m predicting more Australians than ever will seek out the services of a broker”

Anja Pannek, MFAA

Pandemic hangover

Industry improvements

Published 13 Nov 2023

$BN

Source: ABS lending indicators

Three-year trend in value of new housing loan commitments*

24.10

Nov 20

Is the worst over yet?

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Now, in line with the Reserve Bank of Australia’s fiscal tightening campaign that began in May 2022, government data shows that the value of new housing loan commitments has rapidly declined from the peaks reached, stabilising at around a third lower in the region of around $23–24 billion per month for much of 2023. MFAA data reflects a similar decline in home loans settled after the frenzy seen in previous periods, with an 8.63% fall in the value of settlements year-on-year to $161.8 billion in the six months to March 2023. This marked the first decline since the April–September 2019 period.

28.78

31.61

31.24

32.52

33.00

31.28

27.39

24.50

22.85

24.91

24.82

Feb 21

May 21

Aug 21

Nov 21

Feb 22

May 22

Aug 22

Nov 22

Feb 23

May 23

Aug 23

*Seasonally adjusted

Mar 19

Jun 19

Sep 19

Dec 19

Mar 20

Jun 20

Sep 20

Dec 20

Mar 21

Jun 21

Sep 21

Dec 21

12.9

19.3

11.7

14.0

14.4

20.7

23.6

9.3

6.8

7.8

5.3

6.2

Source: ABS national accounts

Household savings ratio declining

11.3

8.1

7.2

4.4

3.6

3.2

Mar 22

Jun 22

Sep 22

Dec 22

Mar 23

Jun 23

Anja Pannek

MFAA

Industry expert

MFAA

Anja Pannek

Breaking News

Updates

Features

Resources

Events

$BN

Nov 20

24.10

Source: ABS lending indicators

Three-year trend in value of new housing loan commitments*