Broker heads tentatively welcome no-frills budget

Industry leaders have generally welcomed the moves to support the most vulnerable members of society with cost-of-housing support (such as through an increase in the Commonwealth Rent Assistance and through energy rebates).

The Mortgage & Finance Association of Australia (MFAA) said that the government’s Housing Accord, additional NHFIC programs, and the expansion of the Home Guarantee Schemes would go some way to addressing housing supply and the ability for people to access the housing market. 

Anja Pannek, MFAA chief executive, said: “This budget is clearly focussed on preparing Australia to navigate the challenging cost-of-living challenges Australian households are facing.

“It was pleasing to see that many of the priority areas highlighted and recommendations we made in our pre-budget submission [were] recognised in the federal budget.

“We support competition in the home lending sector and welcome budget initiatives aimed at  increasing home ownership pathways and the increasing housing stock.

“Mortgage and finance brokers are key to ensuring competition in home lending continues and we expect them to have access to these initiatives for their clients.” 

Force banks to disclose honeymoon rates

However, others have suggested that more could have been done to address dwindling housing supply and the burden on mortgagors.

Speaking after the budget was handed down, the managing director of the FBAA, Peter White AM, said that the government had a “responsibility to ensure that this budget reduces the cost-of-living pressures on Australians, and in particular those with mortgages who are paying thousands more per year”. 

He added this was particularly the case as the government and RBA had “failed to prepare” borrowers for rate rises.

He revealed that he had now written to the Treasurer and the Minister for Financial Services flagging the impacts of rising rates and borrowers and asking the government to:

• Consider forcing banks to transparently disclose the honeymoon/introductory rate/new borrower rates as well as the existing (back book) borrower rate
• Launch an inquiry into bank practices around this issue of disclosure in order to protect borrowers and vulnerable markets.

Mr White said: “It is vital that new borrowers see this difference — which can be around 0.5 per cent — so they are financing or refinancing with full awareness.

“Too many vulnerable borrowers are being lured into what they believe is a better deal only to find that their rate and payments increase once they are deemed an ‘existing’ borrower. This can result in consumers paying the same as — or more than — they were under their previous lender, despite thinking they received a better deal. This extends to cashback incentives as well, as these may not cover the costs to refinance.

“Trust will be restored in this area when banks are forced to disclose both rates in all advertising, promotions and communications to their new and existing borrowers.”

Other moves that the FBAA head said should be implemented to benefit mortgage borrowers included:

• A “pause” on interest rate rises for a minimum of three to four months to evaluate the true impact of the 11 hikes to date
• A reduction in the serviceability buffer on loans from 3 per cent to 1.5–2 per cent

Supply-related solutions needed now

From the aggregation space, Anthony Waldron, CEO of Mortgage Choice, said he was “pleased” to see initiatives designed to help alleviate cost-of-living pressures, such as the expansion of the Home Guarantee Schemes. 

However, he added: “Having the option to buy with a friend or family member could help Australians who would struggle to buy on their own, but buying property is a big decision and both parties should be on the same page,” noting that buyers should speak to their mortgage broker and seek legal advice before proceeding.

“I would have liked to see this federal budget deliver more substantial initiatives to increase housing supply. 

“The increase to Rent Assistance is welcome and timely but more needs to be done to help alleviate the rental crisis as rental demand continues to outstrip supply. 

“The incentives encouraging investment in build-to-rent property are a positive step, but high construction costs may affect developers’ confidence to build.

“The cost-of-living initiatives are largely incremental in nature, and while they will support some Australians at this time, the impact on housing affordability will do little to address immediate supply-related issues.  

“Some Australians may not be able to access these schemes, potentially leaving them further behind.”  

Opportunities for brokers

Mark Haron, the executive director of Connective, flagged that brokers would need to act quickly to help borrowers take advantage of some of the measures on offer.

He explained: “We’ve seen schemes promoting home ownership exhausted quickly. While the expansion of the eligibility criteria for home ownership is a positive move, the number of places available in the different schemes will remain the same. This means there will be limited spaces for a wider pool of people.

“Brokers need to jump on the opportunity now to have conversations with prospects and clients or risk getting left out.

“Brokers have a valuable role in informing and educating clients about macro changes — now is the time to be proactively engaging.” 

He added that the Small Business Energy Incentive offering small-businesses tax deductions to invest in energy-efficient equipment was also “an opportunity” for brokers to talk to clients about asset financing. 

“We’re increasingly seeing trends in borrowing and in lending products for ‘green’ equipment that can either reduce costs or increase revenue. Brokers who understand this market and the government support available are well placed to make the most of the opportunity,” he said.

“This is an opportunity for brokers to provide value-added services by walking their clients and prospects through the additional government measures available. Brokers need partners, tools, and insights that will support them through this.”

Touching on the measures for SMEs, David Gandolfo, the chair of the Commercial & Asset Finance Brokers Association (CAFBA) said the association was pleased the Instant Asset Write-off had been reinstated beyond June 30, when full immediate expensing will expire, but added: "The $20,000 maximum asset value falls short of the value of most motor vehicles and business equipment, and CAFBA's submission to Treasury proposed a value of $100,000 to be fully expensed. This would save most small businesses around $900 per year in the accounting cost of preparing depreciation schedules, and would reduce the administration at the ATO.

"We will continue to provide quantifiable arguments for that increase."

The commercial broker also welcomed the 20 per cent additional tax incentive for energy efficient assets up to $100,000, but said "the detail of exclusions and method of claiming the 20 per cent is complicated and we will propose a simpler method of delivering the tax benefit".

"On the very positive side, we welcome cost-of-living relief for mortgage holders, and small business owners, and the intention of the Budget to reduce inflation is positive for the interest-rate outlook."

[Related: Small rewards for small business in Budget 2023/24]