Unlike many mortgage brokers, this one didn’t start with a finance background
This Top 100 broker puts his success down to the team he has behind him
- 2018 Commercial Lenders Roundtable
- Top 10 Brokerages 2018
- 2018 Brokers on Aggregators
In a rare move, the Reserve Bank of Australia made the decision in mid-March to cut the interest rate to an incredibly low 0.25% as the COVID-19 outbreak continues to put a stop to normal life in Australia and across the world.
In his statement, RBA Governor Philip Lowe said that while the virus was “first and foremost a public health issue”, it was also having a real impact on the economy and the financial system. Border restrictions, the cancellation of hundreds of events, business closures and people in self-isolation are having a detrimental effect on businesses.
According to the Prime Minister and other government officials and experts, these measures may last for the next six months.
Lowe said that while the country waited for the virus to be contained and the economy to recover, the priority for the RBA was to “support jobs, incomes and businesses so that when the health crisis recedes, the country is well placed to recover strongly”.
Measures to support the economy
The RBA has also announced that it will begin quantitative easing and launch a $90bn funding facility for banks, with particular support for those helping SMEs.
With over two million SMEs in Australia, accounting for 97% of all businesses, if they suffer, the economy suffers. According to Roy Morgan’s research in March, more than 60% of businesses reported being affected by COVID-19, up 45% from the month before.
The RBA’s move complements an invest-ment announced by the Morrison government of up to $15bn to enable smaller lenders to keep supporting SMEs. It also relaxed responsible lending obligations for certain circumstances to ensure small businesses could access credit quickly. Treasurer Josh Frydenberg called small lenders “critical to Australia’s lending markets”.
“Our government has stepped up and provided that fast response, and we stand ready to do the same” GregMoshal, Prospa
The government initiative was praised by smaller lenders, who are keen to continue helping the SME market across Australia as the coronavirus has a significant impact.
Greg Moshal, CEO of Prospa, said the SME lender welcomed the news. “As innovators, we are well placed to distribute government funding quickly without any long application processes or excess documentation,” he said.
“A fast response is exactly what small busi-ness owners need right now. Our government has stepped up and provided that fast response, and we stand ready to do the same. These measures will also have a direct and tangible effect on Australian jobs and the economy. By maximising their cash flow, small businesses like the ones we serve can continue to pay their staff and suppliers and, crucially, keep their businesses and the economy running.”
The CEO of HashChing – an online market-place that connects business borrowers to brokers – said it was critical that measures were in place to support the “vital” SME sector during these difficult times, but questioned whether it was enough.“This much-needed financial support will definitely help in the short term and be an immediate sugar hit,” Arun Maharaj said.
“Injecting this funding specifically to smaller lenders will help them to stay nimble and further support their ability to be quick and efficient at getting out the necessary loans to SMEs. SMEs desperately need quicker access to funds, which is what the smaller lenders are able to provide. The question is, will the funding go far enough? I think the government needs to go further and consider tax relief, such as extensions of time to lodge and pay tax obligations.”
“Small businesses are the most vulnerable part of the economy and have the most urgent need for assistance” Anna Bligh, ABA
The Australian Banking Association has also announced a small business relief package that will see banks defer loan repayments for six months for small businesses that need help due to COVID-19. ABA CEO Anna Bligh said it would apply to more than $100bn in existing small business loans and, depending on customer take-up, could put as much as $8bn back into the pockets of these businesses.
“This pandemic has begun to have serious impacts across the economy, with small busi-nesses beginning to feel the devastating effects,” Bligh said. “Small businesses are the most vulnerable part of the economy and have the most urgent need for assistance. Small businesses employ five million Australians, and this package is designed to help them keep doing just that. Small businesses can rest assured that if they need help, they will get it.”
'Lighthouse in the storm'
As banks and lenders offer different rates and options, brokers may find more borrowers coming to them for assistance. Loan Market executive chairman Sam White said clients were looking for a “lighthouse in the storm” during these unsettled times.
“After the health of family and friends, finances are the top priority for clients at the moment – from first home buyers to seasoned investors, and mum and dad mortgage holders to business operators,” White said.
The property market is expected to take a big hit this year, which in turn will affect broker businesses.
FBAA managing director Peter White said brokers must be prepared for the pandemic to affect them “on a number of fronts”. Not only must brokers ensure they have the technology and knowledge to be able to transition to an online model, but they must prepare for an increase in clients who are struggling due to job losses and business closures.
“We must be ready to guide our clients to lenders who can help them in their time of financial hardship, therefore it is vital we know what each lender is offering in terms of support,” White said, adding that it was not just existing clients that brokers should be prepared to help.
“New home buyers and investors will emerge to take advantage of a weaker market, and we must be able to deal with this at the same time. Most brokers will need this new business for their own viability,” he said.