Lending competition tops 2023–24 budget requests: MFAA

In an official ‘pre-budget submission’ issued on Tuesday (31 January) to federal Treasurer Jim Chalmers, home lending competition headed up a list of five key areas the industry body beseeched the government to address on behalf of its mortgage broking members.

MFAA chief executive Anja Pannek and policy and legal head Naveen Ahluwalia said: “We believe the [budget] should focus on assisting households to weather the cost-of-living crisis and to continue to invest in initiatives to boost economic activity following from the COVID-19 pandemic.

“We therefore consider it critical that the 2023–24 budget focus on initiatives in the following five key areas of priority: competition in the home lending sector; financial and digital literacy initiatives for individuals and small businesses; cybersecurity protections for small businesses; digital innovation; and diversity and inclusion as crucial areas to be addressed by the 2023–24 federal budget.”

In the MFAA’s pre-budget submission, it outlined the scale and importance of the mortgage broker to millions of Australians in the current rising rate environment and recommended a raft of key ‘futureproofing’ initiatives in the rapidly evolving digital financial working environment.

“Brokers play an important role in intermediated lending, providing access to credit and promoting choice in both consumer and business finance,” they said.

“The broking industry is one of the most systemically important industries in the Australian economy, with more than 71.1 per cent of all new residential home loans in Australia written by mortgage brokers.

“Notably, between July and September 2022, brokers facilitated more than $94.9 billion in home loans, the highest observed for a September quarter.

“The continued increase in customers using brokers highlights the important role that brokers in play in Australia’s housing industry.

“Brokers also provide significant support to Australian small businesses, facilitating at least four in 10 small business loans in Australia.”

The MFAA reiterated to Treasury that in November 2022, refinancing rose by 8.2 per cent to a record high of $19.5 billion, 20.4 per cent higher than the same time last year.

Additionally, almost “a third of Australian home loan customers are considering refinancing their home loan in the next 12 months, with at least a third of those indicating they are looking to do so to reduce repayments.”

Key recommendations at a glance

In terms of budgetary focus on competition in the home lending sector, the MFAA recommended implementing recommendations from the Home Loan Price Inquiry and to design shared equity schemes to include “choice for prospective home buyers to utilise the services of mortgage brokers.”

It sought expansion of government schemes to “positively increase home ownership rates” while asking Treasury to ensure regulatory costs on small broking businesses are “proportionate and fit for purpose”.

Ultimately it sought the government to continue to facilitate a “more adaptive, efficient and navigable” financial services regulatory environment.

Digital innovation was also emphasised, given the SME nature of many broker-related businesses needing to enmesh their services with bigger financial entities, like major banks, and their advancing tech requirements.

The MFAA has called for financial and digital literacy initiatives for individuals and small businesses plus delivery of greater levels of financial and digital literacy in particular in rural and regional areas by the government co-investing with the MFAA.

Increased funding for financial counselling services across Australia was also recommended while enhanced consumer protections through regulating buy now, pay later (BNPL) as credit within the National Consumer Credit Protection Act 2009 (Cth) were underlined.

Next-gen digital security for industry

Cyber security protections for small businesses would need the government to provide grants to eligible SMEs to invest in cyber software solutions and training programs, the MFAA explained.

It would also need to provide funding to the Australian Small Business and Family Enterprise Ombudsman (ASBFEO) to deliver education and training to small businesses on good cyber security practices.

The MFAA also has requested continued funding of the Australian Cyber Security Centre (ACSC) to “monitor and report on specific cyber-security threats to small and medium businesses” and to continue to deliver technical “guidance” materials.

Further recommendations included to “digitise and modernise government infrastructure” to facilitate better user experience and this included “continued prioritisation by ASIC on updating and upgrading its online services and regulatory portals.”

Additionally, the government should continue to prioritise investment in technology-related training to build a “skilled cyber workforce”. That is, for example, through funding for “cyber apprenticeships”, improved vocational pathways for “cyber careers”, and increasing public-private partnerships (for example co-investing with the MFAA) in upskilling and educating small businesses.

Digital push in the CDR field

With Consumer Data Right (CDR) being at the forefront of future banking interactions, the mortgage broking industry needed to keep pace via government assistance, the MFAA outlined. It recommended continued investment in take-up of CDR including through co-investing in consumer education with the MFAA, plus supporting the digital transformation in home lending.

An increase funding to improve digital literacy for specific sectors of the economy to provide “equal and safe” access to the digital economy was also touted.

Finally, moves to establish a “digital modernisation fund” to address the digital gap between large and small business and encourage SMEs to invest in technology and digital innovation would be welcomed, the MFAA said.

Female talent drive for industry growth

In terms of diversity and inclusion, the MFAA has implored the government to invest in female-led small-broking businesses to “grow and scale through targeted training-based resources centred around effective business management”.

Additionally, there should be incentivisation to recruit talent through government-sponsored “pathways” while there should be continued expansion of the skilled migrant visa program in “a targeted way to plug gaps within the labour market”.

[Related: MFAA calls for BNPL to be regulated]