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In an environment of “lower demand for home loans”, brokers are looking to diversify their income streams “more than ever”, according to the non-bank lender.
Due to the changing economic environment, brokers are “more than ever seeking to diversify their income stream[s]”, Liberty Financial Group (Liberty) has noted.
While releasing its 2023 annual report on Monday (25 September), the lender highlighted that brokers are looking at new ways of bringing in revenue given “an environment of lower demand for home loans”.
The group – which includes the non-bank lender and aggregator Liberty Network Services – said it would continue to look to help brokers as they strive to diversify, with broader product options including “solutions that many do not have the capabilities to offer such as business lending and floor plan finance”.
Liberty chair Richard Longes noted that there would likely be lower demand for home finance in the 2023–24 financial year, which would potentially impact the lender’s profitability.
However, he stated that, like brokers, the lender needed to continue to prioritise a diversification of its products to remain in a strong financial position.
Mr Longes stated: “The likely continuation of lower demand for home finance and capital market pressures will continue to impact profitability for the next financial year.
“However, the company is in a strong financial position and has the capabilities to diversify its products and services to customers and to add value through the cycle.
“We are optimistic about new opportunities emerging over the coming years and believe that there are many more customers that we can help.”
The chief executive of Liberty, James Boyle, said the lender was “very proud” of its net promoter score for brokers, reaching 82 in FY23, up from 81 the previous one despite the increasingly challenging economic climate.
The lender was also pleased with its net promotor score of 59 among customers, a slight fall from 64 the previous year.
Looking forward, Mr Boyle stated that Liberty would continue to look to help brokers and customers where larger institutions were unable to, with the lender having seen an increase in the number of customers they assisted “with loan repayment variations ensuring they retained their homes and cars and places of business,” due to the increase in interest rates and the cost of living.
He added: “We will continue to provide this support in FY24 to help our customers navigate the consequences of higher inflation.
“Given the changing economic environment we all face, we remain cautious yet optimistic. Cautious that consumer needs will evolve and competitor practices will moderate in the next 12 months. Optimistic that our people, culture, operating systems, balance sheet strength and free-thinking approach will enable us to successfully manage through the inevitable changes.
“We will focus on sustainable and profitable portfolio growth, while investing in improving our customer experience through digital and online solutions.”
Mortgage originations fell 23% in FY23
Liberty’s annual report follows its FY23 results, which revealed its mortgage originations fell 23 per cent to $3.0 billion, compared to $3.9 billion in FY22.
Despite the fall, the lender’s diversification plan saw its overall loan book grow 4 per cent to $13.5 billion, supported by a 43 per cent rise in secured finance lending, up to $2 billion, and continued growth in auto finance lending.
At the time of the results release Mr Boyle told The Adviser that Liberty was looking to help partner with brokers to provide a “broader range of solutions for a broader range of customers”.
“In a year where we expect credit growth to be subdued – and once we get to the end of the fixed rate/mortgage repricing [boom] and the focus and demand from customers perhaps reduces, as well – I think the best thing that the broker community can do is make sure that they’ve got lots of different ways to help customers so that they can continue to grow their own businesses and importantly, help customers in different ways,” Mr Boyle said.
“We’re an exceptional partner to help them [on] that journey.
“We try to be super consistent and offer the best product we possibly can with the best solution we possibly can … and across the broadest number of customers that we possibly can. Because we accept that, at any point in time, one space might not be as appealing for new business for the broker community as others.
“SMSF lending, SME lending, margin lending, personal lending, residential lending, insurance products. These are all ways that we try to be really super relevant to brokers and therefore to customers, so as to make sure that – if there’s not as much activity in any one area at one point in time, there are other things that customers still need.
“That’s been a long-term strategy and we continue to focus on it, which means we hopefully don’t need to be overly reactive to these realities.
“The economy is going to go through periods where it contracts and expands and customers are going to go through periods where they’re feeling confident and not, so by [diversifying] hopefully we can always find time relevance and help customers regardless of those changes.”
[Related: Brokers should be diversifying in FY24: Liberty CEO]
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