Reflections on 2024 and looking to 2025

Navigating uncertainty

Many Australians are feeling the pinch – persistently high inflation and interest rates are putting pressure on household budgets and, for some home owners, creating mortgage stress. Higher borrowing costs, serviceability challenges, and affordability are also suppressing new mortgage credit activity. The road ahead will be challenging. The forecasts published in the Reserve Bank of Australia’s most recent quarterly Statement on Monetary Policy do not see inflation returning sustainably to the midpoint of the target until 2026.

As these conditions continue, more borrowers with diverse financial backgrounds are looking for someone who gets them and is willing to take a look at their unique situation. As customers try to navigate and understand the complex financial marketplace, mortgage brokers are more vital than ever. They have bridged the gap between the complex world of mortgages and the aspirations of countless individuals and families this year – many who once thought it was beyond their reach or received a “no” in the past.

Australia’s housing market is a critical part of the national economy, influencing everything from consumer spending to financial stability. Despite ongoing speculation about a potential housing bubble, the markets have shown remarkable resilience, defying predictions and underscoring the stability of our financial system. This resilience reflects not only the strength of the markets but also the borrowers who continue to meet their obligations in a challenging economic environment.

On the other hand, the automotive market continues to experience robust growth, fuelled by changing consumer preferences and the growing availability of financing options and novated leasing options. Research shows a trend towards used vehicles, mainly due to their affordability and the availability of attractive financing plans offered by non-bank lenders. We’re also witnessing rising demand for passenger vehicles, driven by improvements in financing for electric and hybrid vehicles, aligning with the industry’s move towards sustainability.

Harnessing technology for innovation

One of the most significant trends shaping the finance industry is the accelerated focus on AI technology. This fast-moving technology is revolutionising the way lenders, mortgage brokers, and customers do business, offering new opportunities for growth, innovation, and engagement. From digital banking platforms to app-oriented finance channels and AI-driven financial advice, technology is enabling financial firms to deliver smarter, more personalised and efficient products and services.

However, as we continue to integrate these technologies, it’s important to ensure that they enhance rather than replace the human element of financial services. Customers must feel confident that they can navigate the complex financial landscape and access a range of products and services they need in a way that is convenient, ethical, and secure.

The industry will maintain the trust and confidence of customers by making sure we leverage technological advancements, safeguarding their personal and financial data, and continuously improving our products and services to meet the diverse needs of a modern Australia.

Building an inclusive financial future

Customer choice is at the heart of a healthy financial system. This focus on customer choice and inclusivity ensures that the finance industry remains responsive and adaptable to the changing demands of customers and the expectations of the wider community.

The ability of customers to make informed decisions about their products, services, and technologies is crucial for the overall health of the economy. Mortgage brokers are vital agents in giving borrowers the keys to access a huge range of lenders, which brings greater competition to the market and ensures choice and convenience when selecting a home loan.

The finance industry includes a range of diverse lending models to empower borrowers. The non-bank sector, in particular, plays a vital role in the Australian financial system – fostering financial inclusion in a market where the real-life needs of borrowers are not always adequately met by mainstream banks. This trend underscores a shifting landscape where changing borrower profiles, competition, and innovation are driving greater accessibility for the growing number of Aussies who need options from a lender with a real-life approach.

Looking ahead: Embracing change and opportunity

The finance industry is at a critical juncture. The challenges we face are significant, but so, too, are the opportunities. By continuing to collaborate, embrace technology, and promote competition, we can build a financial system that delivers better outcomes for all Australians.

In 2025, all eyes will be fixated on developments in the global economy and financial markets, trends in domestic demand, and the outlook for inflation and the labour market. While the prospect of a cash rate cut remains on the horizon, we expect that the RBA will want to be more confident that inflationary pressures have eased before making that call.

So, as we approach the year-end, a time when people typically review their finances and reset for the new year, brokers have a golden opportunity to proactively connect with their clients, maintain open communication, and help them understand their options.

Our focus should be on ensuring that our industry remains resilient, innovative, and responsive to the diverse needs of all the customers and partners we serve. The foundations we have laid this year will support a vibrant finance industry – one that can meet the challenges of today and seize the opportunities of tomorrow.

Mario Rehayem is the CEO of non-bank lender Pepper Money.