Speaking at the first of the aggregator’s newly introduced weekly webinars last Thursday, Connective executive director Mark Haron detailed the most recent industry updates and outlined what brokers need to be aware of in the current COVID-19 environment.
Loan repayment suspensions
Haron highlighted that the six-month repayment suspensions being offered by many banks should be considered only for customers in financial hardship who are truly without other options.
“We need to make sure that consumers understand this is not a suspension of the interest calculation. It just means the customer does not have to make the payment for that month,” he said.
“Obviously, after that six-month period, that is going to leave the customer with a bigger loan with the capitalised interest. That needs to be properly explained to the customer.
“There are many, many other options they can avail themselves with prior to getting to the point of actually using the repayment suspension.”
According to Haron, brokers are reporting that it’s their customers who aren’t actually in major financial hardship who are asking questions about the repayment holiday, without realising it’ll “leave them in a worse position”.
Customers with significant funds in an offset account with availability of redraw were cited as an example of the avenues worth pursuing before a borrower opts to drag out their payment period.
The housing market
While things are changing daily, and it seems too early to predict the fullness of the virus’ impact on the housing market, Haron reiterated the message that activity has and will continue to slow, but values have held steady to this point.
“For the housing market, one of the major impacts announced by the government is real estate agents not being able to conduct on-site auctions and banning open houses to a single house inspection by appointment,” he said.
“That will – and we’ve already seen it – slow down the market.”
Funding from government
Noting that brokers are the most ideally positioned players to offer immediate support to businesses being impacted by COVID-19, Haron explained that industry leaders are actively working to ensure brokers are incorporated into the application of the government’s small business funding stimulus plans.
One such initiative is the Coronavirus SME Guarantee Scheme, introduced to support the flow of credit by enhancing lenders’ willingness and ability to provide credit, with the government guaranteeing 50% of new loans issued by eligible lenders to SMEs.
“We’re working with lenders in respect to how brokers can participate more fully that. We don’t want it to turn into another First Home Loan Deposit Scheme debacle,” said Haron.
On the future
Haron encouraged brokers who are facing COVID-19 induced struggles of their own to reach out to their aggregator or an association body for support.
“You can only save your customers if you’re saving yourself,” he said.
“It’s important that we continue to survive and thrive as an industry not only because brokers create competition, but because when the economy does improve and the restrictions on meeting and traveling are lifted, we need to be there to ensure we get the economy going again and get things flowing.
“Nobody does that better than mortgage brokers. We saw that off the back of the Global Financial Crisis, helping people get access to funding and helping them get access to home loans.”