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Brokers called to battle “disturbing” loan surge

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Australian Broker | 14 Oct 2016, 07:00 AM Agree 0
A financial expert has condemned the surge in interest-only loans, giving advice to brokers about how to quell this trend
  • DCH | 14 Oct 2016, 08:56 AM Agree 0
    Those that can, do. Those that can't, teach. Blah, blah, generalise, generalise, blah, blah.
  • Just another expert | 14 Oct 2016, 09:00 AM Agree 0
    What colour is the sun in his world?

    Another expert, making up his own conclusions. Has he ever done the numbers on how little a mortgage reduces by in the first 5-10 years on P&I - would make 2/5ths of nothing difference to trail to write interest only or P&I - hence it would have no impact to a broker.

    Fed up with so called experts just making stuff up, based on their own personal assumptions.
  • Broker | 14 Oct 2016, 09:10 AM Agree 0
    To suggest that Brokers write interest only loans to maximise trail is just ridiculous as this would increase annual trail payments by about $7 per annum on a 400K loan, surely this guy is joking.
  • Holistic Adviser with practical experience | 14 Oct 2016, 09:16 AM Agree 0
    Good to see that 'Wally' is alive and well in his Ivory Tower. The very narrow view of potential client strategy portrayed is not a good look for Deakin. Our academics should be leading the debate not 'tagging along'. Where are the figures? Where are the exceptions which are good strategy. Mark out of ten for the article - 'sub prime'!
  • Syd Broker | 14 Oct 2016, 09:28 AM Agree 0
    the conversation around interest only loans rarely (if ever) considers the accumulation profile in the 100% offset account. Ask the banks and other lenders about offset account balances and accumulation before you make comments that are inflammatory and irrelevant.
    This guy is no "expert" and clearly does not understand the market or the products.
  • Christine | 14 Oct 2016, 09:55 AM Agree 0
    Another Academic who thinks he understands a PROFESSION that he has no involvement in. I never ever comment in these forums but this has incensed me so much that I feel the need to. Good brokers and I believe that is now the majority will be focused on putting strategies in place that will enhance their clients ability to repay their owner occupied lending first and foremost with interest only applied only to investment properties until such time as the principle place of residence is unencumbered. THAT caring about the long term goals of clients WILL ensure the loyalty of clients and their ongoing business. The commission factor is irrelevant, it's about building strong relationships with clients understanding their goals and showing them how to achieve them.
  • Regional Broker | 14 Oct 2016, 10:03 AM Agree 0
    Can I ask why Australian Broker s giving these so called Experts any space or credibility by picking up rubbish assertions such as this ?
    Is he a failed investment adviser ?? Or just an ill informed academic ??

    This fellow is in fairy land , there are many good reasons why a client needs or wants an Interest only Loan such as construction, Tax Positioning and so on . I do agree that the so called Property "Guru's" and investment advisers are overdoing it .

    A Mortgage Broker MUST understand a borrowers need and "recommend a loan that is NOT unsuitable" , we are also to give clients a clear choice !! Does the Professor understand this probably not ! He seems to be confused and investment adviser and a mortgage broker.

    The comment about over usage in interest only loans to keep a higher trailing income is particularly offensive and ill informed , The difference between trailers on a say $400,000 loan on a 3 year interest only term and a 30 year Principal and interest loan is negligible in the first 3 years . Please can he realise that we MUST recommend the most suitable loan !!

    If he is serious , leave the teaching world and become a MORTGAGE BROKER , I suspect he would fail .
    • Gold Coast Broker | 14 Oct 2016, 11:29 AM Agree 0
      I agree with Regional Broker, how can an airhead get any airtime to voice his expert opinion of which he has no knowledge of or facts for. Yes he is in fairy land and quite possibly a failed investment adviser. I agree there are property guru's out there who self promote interest only loans just so they can sell properties, but us professional brokers will not give a loan that is "NOT UNSUITABLE". where did this guy get his information from. Mate you want to see and experience reality come into our world and become a broker to see how we conduct ourselves professionally, ethically and morally.
  • MPA Lake Macquarie | 14 Oct 2016, 10:17 AM Agree 0
    An alarming trend in the mortgage industry. Every man and his dog adding fuel to the fire of hysteria without considering the the larger picture. Several recent articles citing research, surveys and expert opinion are mostly outdated by the actions of our regulators and those of the banks we work so closely with.
    This story is a good case in point. Months ago APRA took action to curb the trend, lenders took blunt action to increase rates ( a reasonable action within their reach and control) and brokers continue to have the rich conversations with their clients and understand their needs, objectives and goals, ah that's right RG209 springs to mind.
    There is no benefit in a broker introducing bad debt into their business, consider the clawback, reputation damage and regulatory oversight. All aspects of the industry and associated industries should be working together in the interest of clients and the economy.
  • Dr Adrian Raftery | 14 Oct 2016, 04:46 PM Agree 0
    Many thanks for the 'feedback' from everyone. I have spoken with the journalist & he has updated the original article to now include an opening paragraph to provide much needed context to my commentary on a very worrying trend for OWNER-OCCUPIERS taking out interest only loans in such a low rate environment. My comments are based on up-to-date published facts by the regulator & not merely fabricated from thin air. I agree that there may very well be some perfectly logical reasons for first home buyers to have interest-only loans but I dispute that they should represent such a high proportion ($59B) of the total loan market. If you read carefully I do not attribute blame to the broking industry although I do point out that the trail on $59B is significantly higher than on $6B & that there is obvious benefit being derived from this overall strategy. I have had 25 years of skin in the game (compared to 6 in academia following a move after the passing of my daughter Sophie) so I would like to think that I have some level of credibility that some have attempted to discredit today. Many thanks to those who took the time to call my office today at Deakin - I am glad that I was able to provide a more thorough explanation to you as well as have the opening paragraph now included in this amended article.

    In my opinion, the general public needs to improve their financial literacy and some consideration should be made for sign-off of this strategy by a financial adviser before interest-only loans in future are implemented by OWNER-OCCUPIERS. I would suggest that my observations to the APRA data has at least raised awareness to this trend which was virtually non-existent in the marketplace just 15 months ago.

    Have a great weekend.
  • Let's think now | 17 Oct 2016, 03:59 PM Agree 0
    I'm a broker and I tend to agree with the academic.

    Firstly, calling someone with a PhD an 'air head' among other insults is embarrassing and maybe ironic.

    "the amount of interest-only loans by owner-occupiers with major banks has increased from around $6 billion in June 2015 to $59 billion in June 2016"

    If true these figures are alarming and I thank the professor for his work.

    Please don't be put off by insults from a few in this 'profession' (who appear to be straying into 'financial advice').
  • Wealth Effect | 03 Jan 2017, 11:16 AM Agree 0
    Do the commenters on this article display the kind of defensive behaviors David Murray is referring to in this video ???
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