Eyes wide open: Tackling the horizon head on

As we head into the new year, now is the time to be realistic but not catastrophic nor complacent. Conversely, it’s prudent to recognise and plan to best navigate (and optimise) the current conditions, which is the purpose of this article. 

Let’s start by focusing on just how abnormal the times have been by focusing on the below graph from the Australian Bureau of Statistics (ABS):

Having reviewed ABS, plus other economic data, there are a few key indicators that should be on brokers’ radars in the new year:

1. Borrowing has been at a historic high, but it’s now headed down. It’s important to realise, in context, that this is an expected and natural course correction. That said, it will be met with various challenges.
2. The property market has been unnaturally and unsustainably inflated. Again, it’s reasonable to expect that ‘what goes up will come down and that the impact of any ‘over investment’ will be felt by owner occupiers and investors alike.
3. We are still well above a ‘normal’ level of borrowing activity. Therefore, we should continue to expect significant declines to get back to ‘normal.’
4. It is expected that the RBA will keep raising interest rates until such time as the inflation rate is bought back into line with set targets (which, in plain English, means they will keep raising rates until the economy slows).

Mixed in with the above is that 

1. A significant cohort of purchasers have never lived through a period of high-interest rates and inflation that bruised previous generations and spurred modern society's spending versus a savings mentality. This may result in a ‘nasty shock’ for Generations X, Y and Millennials, who innocently may have maneuvered themselves into an unenviable debt hole. This is going to invariably cause substantial distress. 
2. Similarly, ‘living within one’s means’ is not necessarily embraced in a time of a buoyant economy and, of late, propped up by government stimulus. 
3. Following on from the above, consumer savings was at an all-time high throughout COVID. These excess savings are being drained quickly, and are ‘masking’ the true impact of mortgage distress for many householders. 

So, the million-dollar question: what does this mean in real terms?

Here are our top 10 tips to help navigate 2023:

1. Be proactive: Instigate financial health checks with clients and have conversations that remove their heads from being buried in the sand. In particular, we encourage brokers to remain on the front foot for first-home buyers and highly geared buyers, as pain now is better than even greater pain later.
2. Encourage your clients to be prudent: For many borrowers, now is not the time to take on major fixed costs. 
3. Know your strengths and expertise: Be sure to draw upon your strengths to offset limited bandwidth (also realising that ‘a sum is better than its parts’). Most importantly, if uncertain, don’t ‘fly by the seat of your pants.’ Now is the time to actively collaborate with other brokers and industry referral partners - – particularly financial planners and accountants, particularly when presented with difficult client situations. 
4. Recognise hardship: Should a client face financial hardship, it’s wise to involve the lender earlier rather than later, and potentially connect clients with the National Debt Helpline. If uncertain about what to do, also seek counsel from your aggregator.
5. Don’t underestimate the power of empathy: Don’t underestimate the power of human connection and the question: ‘Are you ok?’ (and be prepared to really listen to the answer).
6. Prioritise your own mental health: We’re in time that is extremely taxing and relentless. And it’s showing no signs of stopping. Prioritise your mental health and well-being and actively create times of respite and reprieve. It’s also important to integrate yourself with a solid support network (personal and professional), and openly communicate/ seek help if you’re struggling
7. Embrace the opportunity: Brokers are increasingly assuming the position of the ‘old-fashioned bank manager’ and providing a source of solace, counsel and resolution to fulfil a client’s personal or business funding requirements. 
8. It’s not all doom and gloom! Disruption breeds opportunity. And it lies in your database.  
9. Become your client’s greatest hero: You can become a client’s greatest hero by minimising the distress and facing the ‘eye of the storm’ together (which is the perfect environment to breed your greatest advocates (a.k.a. sources of referral and opportunities to diversify)). 
10. Buckle up. The never-ending eye of the storm is omnipresent. But it doesn’t need to be insurmountable. Keep your eyes wide open, and be prepared for the juxtaposition of extraordinary opportunity laced with challenge. 

 And as a final comment from an ‘old player,’ is that I think 2023 will see a myriad of challenges, though we are well-placed to manage in comparison with other economies. After all, we’re a robust lot, and I have confidence that we’ll muddle through, as we always seem to do. 

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.