Being in the broking business for 20 years and having gone through the GFC and several boom and bust cycles, Aussie Hornsby and Mona Vale franchisee Alex Ralec thought he had seen it all. Then the Banking Royal Commission and APRA happened, subjecting the industry to the tightest lending regime it has ever encountered.
In an interview with MPA, Ralec, a 2018 MPA Top 100 Brokers finalist, revealed that the tightening of credit policies - together with living expenses increasing beyond the CPI and lenders adopting a “very cautious approach” to home loans - bring him the biggest business challenges at present.
He said that clients don’t understand those issues because having equity makes them think banks should be falling all over themselves to lend more money.
“We’re explaining to clients how the bank uses an 8% interest servicing rate and their positively geared interest-only investment home loan isn’t assessed by the bank in the same way,” Ralec said. “Educating borrowers is all part of a broker’s role, so borrowers are also aware of credit limitations and why they’re in place.”
Mostly notepad and pen
According to Ralec, a great team of brokers and support staff has allowed his business to write a fairly constant volume of loans despite the barriers the broking community has seen in the last few years, such as APRA’s cap on investment lending, lenders credit requirements and the Royal Commission putting a spotlight on the financial services sector.
Ralec said his team works to ensure their clients get a suitable loan “that’s processed in a timely and professional manner.”
He added that when his team initially meets a client, a bulk of the interview happens with a notepad and pen. His team writes down important details about clients, such as their reason for borrowing and their maximum loan amount, before delivering a solution.
“The interest rate is irrelevant if you can’t get the loan,” Ralec said. “We do as much post settlement as the lender allows. Or we translate mortgage jargon, so our clients can call the lender and in one phone call have their query resolved.”
His team also makes use of a database that allows them to monitor where business comes from, which avenue leads to more success and where to focus marketing spend.
To band together again
Amidst industry challenges, Ralec has seen first home buyers increase by around 30% and refinancing picking up due to the banks changing rates outside the Reserve Bank cash movement and the loading on interest-only and investment lending.
He said that although the “upcoming election and some Labor policies are not conducive to growing the property or broker market,” they pose a great opportunity for the mortgage broking industry to once again band together and work with the upper house senators to give all Australians access to a fairly remunerated mortgage broker.
“For those at the forefront of wanting to change our remuneration, they should be thankful that all borrowers are not made to visit a mortgage broker so they can get true, fair and impartial mortgage advice,” Ralec said.
“Business wise, would be great to wind back a little bit, work just a few days a week, and hopefully transition to retirement with some clarity and certainty around our industry.”