Federal Budget Part 2 – how the budget will impact residential lending

The measured outlined in the Federal Budget last week had many first home-buyers excited – but will these incentives be enough to encourage more Australians to borrow? In part two of our exclusive look at the 2020 Federal Budget, MPA spoke with the founder of National Finance Brokers Day and Marketplace Finance national manager – partner acquisition Dino Pacella, Specialist Finance Group aggregation manager Blake Buchanan and Australia’s highest ranking Top 100 broker Darren Liu, about the impact the budget could have on the residential space and how brokers should prepare.

FHLDS and the new credit rules – will it cut it?

While the extension of the First Home Loan Deposit Scheme, tax cuts for low to middle income earners and a possible rewriting of credit rules in March 2021 could “get more borrowers on the property train,” the uncertainty of the market should be treated with caution, says Liu.

“We still need to emphasize and advise buyers on the costs and risks associated with higher LVR borrowing – especially in this volatile market, where if there is any future change in employment, they will need an additional cashflow buffer to get over it.”

According to Buchanan, the aforementioned budget measures may not be enough to fill the void of low immigration and population growth.

“I do not entirely agree that the recovery will be led by borrowing money but it will certainly assist and play a significant role with mortgage brokers leading the charge.”

“People need to have jobs to be able to borrow money and this is why the budget direction which assists employers and self-employed Australians has been equally as important.”

While he says the Federal Government has done a great job in several areas, including the extension of the FHLDS, the budget was also lacking in other considerations.

“There are other areas that could have used more focus, such as capital city costs of living, but I have no doubt that there will be more announcements throughout the year.”

“Budgets are not always about dollars and cents but also need to be inspiring, confidence boosting and balance the risks of future debt well.”

Pacella says the budget measures alongside proposed changes to the lending laws will have a positive impact on many borrowers who were previously finding it difficult to attain credit.

“We will see an increase in borrowers enter the market as workers will be keeping more of what they earn, therefore increasing their disposal income.”

“The extension of the FHLDS is a great boost to the market and goes to evidence the strength of the first home buyer throughout the pandemic of 2020.”

Growth opportunities for brokers

Since it is nearly impossible to be an expert in all facets of lending, brokers should look to partner with the right businesses in order to complement their existing offering says Pacella.

They should also develop a clear understanding of how the budget changes will impact the market as well as the changes that lenders are making in their products and policies.

“Now is the time to ensure brokers come out of this pandemic even stronger than when we went in.”

“It’s time to grab this opportunity and help more people.”

Buchanan agrees that the budget presents a strong opportunity for brokers, adding that they should reach out to their customers for a “meaningful discussion about their current circumstances.”

“We should certainly be engaging our self-employed customers now to discuss some of the more specific benefits in this budget, namely the instant asset write off, and in the near future, any of our customers when the serviceability metrics inevitably change as they find more money from paying less tax along with the much needed relaxing of the NCCP parameters.”

For Liu, brokers can leverage these opportunities by preparing for a “digital new normal.”

“It's coming much faster than we thought.”

He says brokers can maximise their ability to target customers and improve conversion rates by using automation and pe-built functions to generate online leads, adding that just one hour per fortnight spent on this could bring lucrative results.

“I generated 79 leads in one video clip post on our website talking about loan minimisation management with an offset account.”

Read all about the business opportunities for brokers and SMEs in part one of our budget analysis.