Brokers should be the first person a borrower speaks to when looking to buy a property, says the managing director of home building group Gemmill Homes.
Craig Gemmill is warning that brokers and borrowers are not just facing longer processing times because of banks looking closer living expenses, but also because of a social change.
He said things like sporadic payments for food delivery or other ‘tap and go’ purchases could impact on whether a bank approves a home loan.
Speaking to brokers at the firm’s in-house broker group, Gemmill said where they used to provide clients with an expenses form they were now having to work much harder to work out smaller expenditure.
Gemmill said if borrowers could speak to brokers from the earliest point, the broker could then educate the borrower on curbing this type of spending.
He added, “There are big things like loan repayments, utilities and weekly expenditure on groceries. What they have been telling me is that they fill that form out, then the banks are cross referencing that to bank accounts and then they’re coming back and saying, if it doesn’t tick all the boxes, they get a please explain.
“What we’re telling our consultants is potentially customers need to do their homework, speak to the brokers before they do their credit checks and without cutting any tracks on their credit file.”
Gemmill said brokers need to think about this in the long-term, saying it is not just a temporary crackdown on living expense assessment, but it is also a change in the way people are spending.
He explained, “[Borrowers] used to go to their ATM, pull out a hundred or two hundred dollars that could be part of their discretionary payments. Now everyone’s doing tap and go.
“When you show the banks their savings they’re saying we notice that, but you’re spending quite a bit on UberEats or Dan Murphy’s.
“What people have to understand is this is a social change, with access to information and it’s across the board. It’s a lifestyle change.
“How many checkouts now do you see where you do it yourself? That wasn’t common a couple of years ago.
“This AfterPay, this tap and go. Afterpay goes down as a debt. Clients have got to understand that if getting a mortgage is important they have really got to watch their discretionary spending.”
Gemmill said with the social change changing the way people spend their money, borrowers also need to change when they speak to their broker.
He said, “It’s time. It’s not just a straight forward process now. Brokers have all got to do more work now they have got to be more diligent with their compliance.
“I think people need to speak to brokers earlier in the process, then the brokers need to educate and help to prepare, whereas in the past purchasing a new home was a fairly emotive decision. Sometimes you put an offer in feeling that you can get the finance because you have got good incomes and then you go and see your broker. In this day and age you’re better off speaking to your broker first.”