Australia is going through a transition period and mortgage brokers need to help their clients through this, says a non-bank treasurer.
This was the key message from Pepper Money treasurer Anthony Moir (pictured) at its Insights Live in-person and live streamed event held in Sydney on July 27.
“We are simply returning to more normalised levels after emergency settings were implemented at the start of the pandemic and brokers need to help their clients through this now more than ever,” Moir said. “You need to get on the front foot and seize the day.”
Moir said Australia was transitioning from the economic armageddon of the early days of the pandemic where the central banks pumped trillions of dollars into the economy.
“Interest rates were lowered to record lows which led to asset inflation,” he said. “Now we are in the transition period as people are coming out of lockdowns and spending money on goods and travel. The inflation problem is real and the central banks are being criticised because they acted to slow – the reality is, we need to give them a bit of a break.”
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Moir said brokers clients would be concerned after the three recent consecutive interest rate hikes.
“The banks’ forecasts are scary. ANZ is predicting the OCR to creep a further 2% between now and November,” he said. “Your clients will be concerned and distressed about this situation.”
Moir said the RBA gave banks cheap money during the last two-and-a-half years and this was coming up for maturity next year, so the banks’ fundings costs would increase in early 2023.
“Although the costs of funds change between banks and non-banks, banks will always be able to access funds cheaper,” he said.
Moir said ANZ was predicting property prices to drop up to 20% in the next 12 months.
“Auction clearance rates have dropped significantly in recent weeks and there is less competition amongst buyers in the market,” he said. “Brokers need to talk to their clients about this as there are opportunities to be taken advantage of in this transitioning market.”
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Moir said throughout the pandemic, household savings increased and many people saved money.
“People’s equity in their homes and their super has gone up a lot more than their debt has, which is a reality for many Australians,” he said. “However, now that we are in a rising rate environment, you need to have the interest rate hike conversation with your clients. Customers who might be challenged with their serviceability when rates were at their lowest might struggle, so you need to discuss this situation with those clients first.”
Moir said in a transitioning market, there was always opportunities for change.
“Talk with your clients and start looking at the best option for them now, because if you don’t have this conversation with them, someone else will,” he said.
