Mortgage brokers brace for collapse in volumes

Via The Advisor:

Slower credit growth and reduced borrowing capacity are expected to wipe 10 per cent off volumes this year, but brokers may find a silver lining in their trail commissions.

Investor lending has fallen by 16.1 per cent over the year to March, while owner-occupied lending is off by 2.2 per cent, according to the Australian Bureau of Statistics.

The latest housing finance statistics show that lending to owner-occupiers fell by 1.9 per cent in March, the highest rate of decline in over two years; investor lending fell by 9 per cent over the month.

However, these figures are yet to reflect the latest round of credit tightening by the major banks, who face increased scrutiny amid damning evidence of irresponsible lending during the first round of the royal commission.

Both the major banks and the RBA expect credit growth to slow.

Digital Finance Analytics principal Martin North believes that we are now entering a “credit crunch”, which will reduce total mortgage volumes by around 10 per cent over the next year.

 Mr North said that the changing credit landscape paints “a complex picture” for brokers.

“The chances are that people will not be moving as swiftly as they had previously, so you might find that, in fact, the trail commissions go on for longer, which is a good piece of news,” Mr North said.

“But in terms of new business volumes, not only is there lower demand now, particularly for property investors, but tighter lending criteria means that brokers will have to work a lot harder to get the information from clients and go through more hoops to get an application processed. Overall volumes will be down.

“My own feeling is that we haven’t yet seen the full impact of the tightening that is happening as we speak. I’m predicting about a 10 per cent fall in volumes over the next year.”

Mr North told The Adviser that cooling property prices may force some property owners in Sydney and Melbourne to capitalise on years of growth, sell up and downsize.

However, he believes that first home buyers are unlikely to fill the gap and that any government incentives are now failing to encourage new mortgage sales. The latest ABS figures show that the percentage of FHBs fell to 17.4 per cent over March.

In addition to tighter credit conditions, mortgage brokers also face increased compliance in response to a slew of inquiries.

“This may mark the point in the cycle where some brokers decide to quit the industry,” Mr North said. “You may end up with a smaller number of brokers. I think there will be a bit of a shake-out.”

Greater scrutiny and increased regulation is the primary driver of tighter lending conditions. However, with the RBA signalling that the next cash rate movement will be up, Mr North sees little indication that the situation will change.

“I don’t think there is anything that will reverse that any time soon,” the principal said. “If anything, rates will go up, further tightening credit. I don’t think this is a temporary shift; it’s a realignment of the market. People need to start planning their businesses on a different trajectory.”


    • Martin is partly correct
      Volume are going to fall more than 10%
      We are at the edge of a cliff in home finance
      Mortgage brokers will leave industry
      It’s going to get very tough and when prices are 10/15% lower
      There will be no refinancing
      Just occasional purchase

      • But the Government is planning to allow high density and high rise in Vaucluse and Paddington for 6000 extra units with 30% affordable housing quotas to house all the ponzi demand and underemployed millenials. (The Fake News we dream of hearing. )

    • you have a point but as discussed (same point) in the past:
      1. To restrict supply developers will have to sack lot people – all these people pay rents and mortgages that are too high to be paid by only one person.
      a. This leads to people defaulting on their mortgages and rents.
      b. Retail spending will freeze – it is weak as it is already.
      2. Immigrants without jobs? High crime, the creation of Favelas or 3 families living in one house and not 3 families living in three houses. So higher immigration without supporting jobs will have very limited impact to your point.

      • Nah mate, plenty of jobs on offer to fix up flammable cladding. Developer doesn’t even have to pick up the bill!

      • J BauerMEMBER

        The immigrants that aust attracts are used to living 3 families in a house, they’ll keep coming as long as it’s slightly better here than at home. Kind of like osmosis.

      • 2. Immigrants without jobs?

        …will go home (or somewhere else in the world doing better – probably meaning anywhere else in the bar Syria or Afghanistan) to wait out the storm, especially if they have their PR status (once you’ve got that, you don’t need to be in Australia to beneift any more)

    • Nothing is new under the sun.

      All the previous setting that underwrote the land price inflation are in place and set to continue.

      They will now just lie about the situation in a slightly different way.

      Anyone expecting a different outcome is setting themselves up to be rather disappointed.

      • it will be very hard to loosen up lending standards again but I can see someone raiding the super – up to 50-70% of your supper for your first home and no restrictions/rules.

      • your assumption that any government anywhere in the world can manipulate even one market in perpetuity is entirely false. Cannot be done. They will fail miserably and only make the ensuing carnage worse.

      • Lots of possibilities: How about raiding your super to get out of a sticky mortgage situation?

        I haven’t started with stupid ideas yet either, what about a futures product for your super – a promise to pay via super that allows you to borrow out from it. I should have been a financial engineer.

      • McPaddyMEMBER

        Peachy, I share your views on the ethics of these folks, but not on their competence. Why, alone among all establishments, will the powers that be in Australia be able to win the fight against gravity?

      • Ajaydee73MEMBER

        You can already access up to $10,000 per year of your super if you’re having problems paying your home loan.

      • As is typical of many Australians, you have an outsized opinion of the powers/abilities of the Australian political class. I doubt very much that our governments will be able to do what every other government in the history of capitalism has so far failed to do: maintain a bubble in perpetuity.

        Have you considered that the current situation in property in this country is down to pure luck?

        “Australia is a lucky country run mainly by second rate people who share its luck. It lives on other people’s ideas, and, although its ordinary people are adaptable, most of its leaders (in all fields) so lack curiosity about the events that surround them that they are often taken by surprise.”

      • it will be very hard to loosen up lending standards again but I can see someone raiding the super – up to 50-70% of your supper for your first home and no restrictions/rules

        So what? If you’ve been working for ten years on average wages, you don’t have all that much super to begin with.

    • I wonder if they have to conform with the already unenforced AML regulation? One hell of a way to launder dirty-dirty money…

      • I put a smidge in there years ago. It’s hooked up with the ATO, so I’m unsure how you’d launder it through as an individual. More switched on folk would probably know how to set up a company or a trust to wash their I’ll gotten gains.

  1. surflessMEMBER

    This morning I listened to a inside investing live wire podcast with amp economist Shane Oliver from the start of the year prior to all the crap that is coming from the royal commission. Mainly a discussion on house prices, and that there will be no bubble nor crash in house prices. Now I can say to Shane Oliver, if I need your opinion, I’ll flush the toilet.

    • Not long ago he was saying prices for Syd in 2018 will grow about 3% and Mel about 8%. ONly few weeks ago he said prices will fall about 20% and now.. I just heard Shane’s opinion as I just got back from having a piss.

      • surflessMEMBER

        Australia needs a Jon Stewart vs Jim Cramer moment, where so called media whore economists are forced to watch and listen to their professional liars. Judith Sloane would be the first one who should eat humble pie!

      • surfless,
        They are our clergy and are therefore above criticism, reproach and sin. It is not for us to question the ways of the market, but to follow the words of the markets’ must humble of servants. For their selfless service we shall let them clip the tickets we offer up to appease our gods. In the name of finance, insurance and real estate, Amen.

  2. Explained to an estate agent this week that I wasn’t upping my offer due to the structural change in the market arising from the imposition of proper lending and underwriting standards. She told me the property was the best bargain on the market (lol), regardless of what banks are doing. Not sure she understands the driver of house prices, but then she’s just a second hand house salesperson.

    • Tell her the house will be a better bargain in a few months time, if she doesn’t like your offer you’re happy to wait 😊

    • Just out selling houses door-to-door 😉

      Maybe when the crash comes, real estate agents can diversify into knives.

    • He’ll be just fine. I used to be a bear but have capitulated. I see restrictions on foreign buyers being completely removed and the AUD dropping simultaneously. Anything on the market being hoovered up, boarded up, tenants evicted, high immigration.

      • With all the loopholes for students, new development (ie knock down and rebuild house), temp residents, no money laundering laws on property, no policing of rules, there is no restriction really now on foreign buyers (unless they foolishly want to buy next to Joe Hockey).
        However the PRC has restricted cash exports so that has reduced them. No Australian policy really.

      • I find the capitulation of many of the bears on this site to be an encouraging sign. Classic bubble-top behaviour.

      • @sdawes

        I hereby declare myself a “don’t-care-bear”, which I guess rules me out of the “bear” category…

        I’m a non-bear/alterna-bear/post-bear 😀

    • Torchwood1979

      LOL! Mortgage Pete, what a jerk that guy was. He never understood that even when he was right about the upward trajectory of house prices it was detrimental for the economy and society as a whole in the long run.

      • McPaddyMEMBER

        I think you overlook the difference between not understanding and not caring.

      • @McPaddy
        I think you confuse the meaning of “overlooking” with “mistaking” 😛

        *ducks and runs*

  3. McPaddyMEMBER

    It’s not “tightening lending criteria”. It’s a requirement to cease illegal lending.

  4. That downsizer thingy is already a problem in this petri dish. Time & again I’m seeing them refusing to take a haircut if they even manage to get an offer to start with. Then they’re gumming up the works by coming in over the top of genuine offers, giving the kennel seller validation for Their rip off price – ‘under contract’ conditional to the sale of their palace, & it all falls through & both end up sitting back on the market, with the kennel expecting more & the palace going unnoticed as per before. Downsizers are going to be a big PITA!

    • I hear you! I know a particular pair of syderney-siders in a place of this world where I’d like to be. Tried to sell “The Manor” on a price about $300,000 above its worth (they want $750,000 – apparently lake access is all the rage. Ignore the fact that just 50 meters over the road similar size land and house is under $450,000). Wasn’t (and still isn’t) worth that but the Nile isn’t just a river in Egypt.

      Anyhooo, they put lipstick on that pig, in the meantime, putting retaining bricks around the base of the trees and so on… It’s still not worth it but you can’t reason with them… I think when the guy drops off the perch (and he’s not looking too flash – kind of has “the call of the dust” colour mark to him) she’ll come to some sense and liquidate at a more suitable price. Oh well, death has a way of putting things in perspective and sorting out priorities like nothing I’ve ever seen.

    • This is why market falls will be quite modest without forced sales. People can sit on their delusional self-invented valuations forever.