The broker balance for FY25: To ‘hunt and hold’

So far, we appear to have avoided the recession feared by many; however, there is no doubt that the target of a ‘soft landing’ is becoming harder to find. While the ‘ice’ is holding, it’s increasingly fragile, which equates to stretched borrowers, compounded by exhausted savings.

Mortgage stress is becoming more prevalent and we’re keeping a very close eye on unemployment, which can quickly tip the scale to break the ‘ice.’

The knock-on effect is a notable rise in unsecured personal borrowings (a 9.8 per cent* rise in personal investments to be exact, according to recent figures from the ABS). Concerningly, but not surprisingly, there’s an uptick in borrowers securing funding for short-term expenses (bad) as opposed to long-term assets and investments (good). This loose fix ‘band-aid’ approach will invariably cause heightened longer-term distress.

Be careful what you wish for

There’s a general consensus in favour of an interest cut before the end of the year, though it’s a double-edged sword: if it comes, as many economists expect, it will most likely be as a result of the economy hitting the skids with a hard landing. Conversely, there’s still a chance of a softer landing, which would likely see the first rate cut early next year.

While interest rates are not currently rising HEM has been relentless. This is becoming the sleeping killer of the mortgage game. The market for refinance is waning.

This brings me to the big picture: if it wasn’t for immigration and mining, the country would be in a real mess. Weirdly, as we face economic issues the current political will is to reduce immigration. Socially this might make sense (and in my opinion it’s only a might, at best), but it doesn’t make economic sense.

Then, if world demand (China) turns down, we could also see our mining profits fall sharply. I don’t wish to be a bear and somehow we seem to always get away with it, but the pad for a soft landing appears to be getting smaller by the day.

Where’s the silver lining?

Back to mortgage broking; this environment is all about dusting off the hunting boots and winning new business. Last year it was all about refinance. This year you need to be out and about. Though keep in mind that new business doesn’t necessarily mean new customers.

We urge brokers to reweight their efforts back to acquiring new business. Of course, it doesn’t mean ignoring your back book, but get out there and get some new referrers. Even better take your current referrers to lunch or whatever works for you.

Here are a few suggestions:

• Reconnect and keep it personal: Customers crave one-on-one connection – particularly in times of turbulence. The more personal the contact, the more likely you’re going to gain traction, engagement, and ultimately conversion. Rather than sending generalised blast emails to your clients, categorise your database as much as possible, then tailor the message and make it relevant. For instance, for business borrowers, provide an update about the instant asset write-offs or other tax updates that they should have on their radar. Or for home owners, call in to check how they’re travelling to strike rapport versus sell.
• Keep it real and be consistent: Don’t overcommit to your ‘hunt and hold.’ Ideally, schedule short blocks of time daily (i.e. 30 minutes) with 75 per cent of your time allocated to retention (including client reactivation and cross-selling) and 25 per cent of your time to new client acquisition.
• Upskill or collaborate: Identify where your ‘gaps’ are (aka new market opportunities). These may include asset/commercial finance for personal and business borrowers, SMSFs, etc. Adopt a ‘tick and flick’ model or collaborate with brokers who specialise in the respective areas to diversify your revenue stream (and further ring-fence customers).
• Cross-sell: Within your database, identify obvious cross-sell opportunities. For instance, let self-employed borrowers know that you provide commercial finance solutions. Or equally, that you now provide SMSF funding, etc.
• Upsell: Assess all new clients holistically and provide the initial loan as ‘stage 1.’ For example, in the due diligence process for a home loan, consider if the client may benefit from debt consolidation, asset finance, etc. Conversely, when assessing a commercial facility, understand what additional facilities may help reduce challenges (i.e. invoice finance to relieve cash flow constraints). Initiate ‘stage 2’ of the loan once the first has been successfully completed and be sure to make notes in your CRM about potential ‘stage 3’-plus opportunities.
• Establish new referral partners: We highly recommend collaborating with a local accountant as a natural referral source for both parties. Keep in mind that accountants are usually very relationship-focused and will respond more favourably when there’s trust and rapport. Or, in other words, don’t be transactional. It rarely goes down well to call an accountant to see if they have any possible deals out of the blue.
• Be opportunistic: Tough markets always separate the ‘wheat from the chaff.’ Be shrewd, collaborative, and opportunistic, keeping in mind that not all clients are in distress.

* ABS

Nick Young is a results-driven specialist who has more than 25 years’ experience in the mortgage broking industry and now heads Trail Homes: Australia’s most established and longest-serving trail book purchaser.

Written by Nick Young

Last Updated: 22 August 2024

Published: 22 July 2024