Peter White is all cheers as he steps into what promises to be another jam-packed financial year in the mortgage broking industry.
The long-serving managing director of the Finance Brokers Association of Australia (FBAA) – with over four decades in finance and more than 22 years at the helm of the FBAA – is in Hobart for the group’s inaugural Tasmania Black Tie Gala. But while the champagne flows, serious undercurrents remain: rising property prices, fluctuating interest rates, global uncertainty and a persistent housing shortage.
Despite the turbulence, White is upbeat about the industry’s direction.
"There's always a lot going on in this industry," White told Australian Broker. "And there's a lot on at the moment. But the industry itself is in very good shape.
"ASIC [Australian Securities and Investments Commission] is currently still undertaking their review and audits under the best interest duties (BID) broker loan profiles. But, I don't believe the industry's got anything to be concerned about with that," he said. "The markets are buoyant. And even though everybody might have been expecting an interest rate drop [in July], it didn't surprise me that we didn't [get one] to be honest. We still believe that there's at least one, if not two more rate drops this year that'll help stimulate the market; that'll keep everybody really busy. The industry is in good shape.
"We've just got to keep making sure that we keep doing the right thing, make sure we comply with our best interest duty obligations, and not take shortcuts in what we're doing," White said. "Because when things are going along really nicely, what you don't want is something to happen to spoil that. So everyone should just keep doing what they're doing, and at this point in time now, brokers are doing a great job."
In an exclusive two-part series, Australian Broker sits down with White to unpack the dynamics shaping the current market, from the housing shortage and shifting economic tides to Australian Prime Minister Anthony Albanese’s re-election to the Labor Party earlier this year and what it all means for brokers navigating the road ahead.
Markets were caught off guard earlier this month when the Reserve Bank of Australia (RBA) held the official cash rate (OCR) at 3.85%, defying expectations from analysts and all four of the Big Four banks. But for White, it was no surprise.
"I don't think the indicators were there, or enough to suggest it was the appropriate time to do it," he said. "The GDP and other stuff is starting to come in line and inflation is starting to come down a little bit. But there are other indicators, like unemployment and what's happening in regards to people's spending habits and so on. If spending is down – which, at the moment, I think it's fairly flat – then [the RBA's decision] is not a one-take measure.
"And I agree with where the Reserve Bank governor [Michele Bullock] landed in saying, we just need to see the data a bit more granularly; we need a bit more data to come through," White continued. "And that's the problem in history: they used to make decisions without really having that depth of data. So consequently, some of the [RBA] decisions, I personally didn't agree with. But if you stop – and this is what the game is all about – stop and look at the right depth of data to make an informed decision, then you'll make the right decision. And if you don't have that data, then it's intellectual common sense to say, let's just pause a sec. The next review is not far away; let's just see the rest of the data; make sure that it keeps backing up. That what we expect and appears to be seen still continues to be seen."
With the market in flux, White shares his insights on how brokers can stay prepared and ahead of the curve.
"The things that brokers need to look at is to make sure they've got their distribution networks right; where they're going to get business from," White said. "And in these times, sometimes you let those things go: your marketing, your community activities and all those sort of stimulus activities you do to generate leads. Sometimes, when things flow well, you tend to let things go. So you need to keep on top of those things; keep on top of your business plan. Make sure it still fits for purpose, and keep monitoring your business the right way. They're fairly fundamental routine things. But they're important things that when things are going well, people tend to let them go a little bit. So you need to keep on top of those things in this sort of marketplace, because there's always a lot happening. And when there's a lot of things happening, keep focused on what you're doing and it'll be a happy time in business.
"They're fairly routine things, but people tend to let those things slip as things get busy, or things get congested, or a bit clouded, because of many other things that are going on in the marketplace," he continued. "One of the things we're very fortunate about at the moment is we don't have a lot happening on a regulatory front. Outside of the [ASIC] audit that's happening on best interest duty for broker loan files, there's not much happening. There's a few little things happening in the regulation area, but there's not a lot to worry about. Quite often in the past, there's been lots of things going on, and that was very distracting for brokers. So, don't get distracted about what's going on. That's what we do – industry associations. We look out for that. But brokers don't have to worry about that."
As part of Albanese's re-election campaign, the prime minister resolved to help clean up the housing crunch and affordability issues with things like the First Home Guarantee Scheme and the Help to Buy Scheme, both aimed at first-time buyers. But White isn’t convinced, saying the measures won’t fix the core of the housing crisis.
"Nothing will help solve the housing crisis," he said. "To solve the housing crisis, there needs to be lots of different things happening. Quite often, you put something in place and you go, that'll help – but it doesn't. Housing guarantee schemes only touch a scratch of the surface. Affordable housing and different means of accommodating that scratches the surface; changing the buffer rate scratches the surface. There are so many different things that need to be considered and balanced out with that, because quite often, some of the things you think will help will actually exacerbate the problem.
"The buffer rates are a classic example of that," White said. "I'm a big believer that the buffer rate is too high. It should come down a bit. Probably shouldn't come down too far, but probably could come down 50 basis, past half percent, from 3% to 2.5%. What you've got to be careful of is, that means that people have greater serviceability; that means they can borrow more. That means people selling houses will charge more: it's cause and effect.
"What you've got to do is balance that play-out between interest rate movements, buffer rate adjustments, and try not to push something out of balance on the way through, like pushing housing prices up," he said. "And that's the other balancing act the Reserve Bank is playing with: If they pull interest rates back too far, it will drive that price of houses up. Because people will be able to borrow more. And then people say, well, we've still got a housing price problem, because people can't get any houses because they're too expensive.
"So we've got to try and find these control mechanisms within the economy to keep it all a bit more relative," White said. "And, probably, what [the government] needs to do is be looking at how they can help construction builders to reduce the cost, like the cost of actually building. I'm not saying that they should bring margins back, but making it more affordable for tools, trade, assisting with apprentices or whatever it is. Everybody goes, 'yay, let's bring interest rates down.' But then housing prices will go up. And if house prices go up, so will rent. It's not just a [house] purchase. It's rent, too."
