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As we wrap up the year, brokers look back at the challenges, triumphs and what lies ahead.
Indeed, it’s been a challenging year for both brokers and borrowers and lenders alike, with high inflation, rising interest rates (at 3.1 per cent), construction delays and a deepening rental crisis.
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Victorian broker Matt Turner at GSC Finance Solutions said the wave of rate rises and property downturns has meant brokers have needed to readjust.
“Our business has had to adapt from a purchase and growth market to reviewing existing debt and restructuring to ensure that we can support our clients,” Mr Turner said.
“Never has there been a more important time as a broker to service our back book and protect our trail.”
He expects that 2023 will bring more clients looking for new deals and refinancing to lessen the impact of rate rises.
“However, the reality is that with the current rules (i.e. buffered repayments), it will mean that some clients will no longer qualify for refinancing of existing limits.”
As lenders are now assessing potential borrowers loan serviceability based on 8 to 9 per cent interest rates, given the 3 per cent buffer on top of rising variable rates, many borrowers will be rejected.
“This will be a challenging conversation to have with clients who have perfect repayment histories and cash buffers,” he said.
In addition, some construction clients may no longer qualify to borrow to build their first homes, as rising construction costs have pushed many companies or left projects stranded.
However, as new housing lending eased off in 2022, business lending remained fairly resilient, beginning to soften towards the end of the year, according to the Commonwealth Bank of Australia lending data.
Seizing the opportunities, Mr Turner has grown the team and diversified into commercial and business lending.
“I am looking forward to the challenges that 2023 throw me, after a very busy 2022.”
Tassie brokerage booms
Weighing in on opportunities 2022 brought, Kirsty Dunphey, co-founder at Up Loans in Tasmania, said her brokerage hit $1 billion in loan settlements, in just eight years with three brokers.
“Very exciting given my average loan size is $250,000. If we kept going at the same rate as we did in year one, that milestone would have taken us 50 years!”
She said this was a great feat to achieve in a smaller market like Tasmania.
Despite being a more affordable market than mainland Australia, the state had seen a significant property boom, with the median property prices at $937,500 in November 2022, compared to $842,500 in August 2020, according to realestate.com.au.
Ms Dunphey said the property boom, alongside rising interest rates in a state where incomes are lower, had been a set back for many single borrowers.
“It’s hard to tell these people how low borrowing capacity is for them without also saying — and we’ve got more rates to come.
“[It’s] a bit disheartening.
“I'd love to see assessment rates lowered in line with advice from the powers that be about where rates are heading.”
With a surge in clients wanting to refinance on the back of rising interest rates, she’d put on an additional full time person for repricing.
“Not only from our annual check ins but also our back book to assist. And we’re having so many proactive conversations with clients — but it’s tough.
“People are scared, and our role has become even more important.”
She added the help of a new spreadsheet that calculates and tracks repricing savings had managed to save a client $18,000 in interest savings on the first day of use.
“It was powerful for her and us and the clients to know the impact.”
2023 a year for investors
Sydney mortgage broker Rebecca Jarrett-Dalton, at Two Red Shoes, said the new year will be the year for investors.
“The rental crisis has created a need for investors, so the time to think about buying an investment property is both now and next year, while we’re still experiencing this dip,” Ms Jarrett-Dalton said.
“People are also starting to think about the future when it comes to their investments. Buying the homes now into which they will retire has become a trend.”
While people would once buy an entertainer’s paradise, most now want the working-from-home haven and are thinking of more futuristic-style houses with consideration for smart homes (or the ability to adapt to one) and space to charge electric cars, she explained.
“With the rising cost of fuel and electricity, it’s no surprise that people are being mindful of the ways they can move into or create the house of the future.
“The last two years have left people feeling more uncertain and fearful than before, but people are also more aware of what they want and are savvier than before, which will make 2023 an interesting one to watch.”
In addition, despite first home buyers being more cautious, there are “still many out there buying that typical starter home” with a rise in early inheritances.
Early inheritance allows first-timers the opportunity to buy their first home or investment property without the added stress of paying back mum and dad as well as their brand-new mortgage.
Further, while people swarmed out of the cities during the pandemic for that sea or tree change, fewer people are willing to make those big moves today due to rising prices across those coastal areas.
“Similarly, while multigenerational living has been both a cultural and practical necessity for many over the years, it’s a trend that we are watching right now.”
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