Will you be able to get finance in 2014?

On the face of it, 2014 looks good for those of us in finance, broking and real estate.  Interest rates will remain low (and maybe lower) and there will be healthy demand for property.

2013 has been a good year and Accredited Broker believes that 2014 will be also.  But next year we may have to work just that little bit harder for our dollar and we may need to brush-up on our skills too.

Australian housing is at its most affordable in decades – and this looks set to continue.  But we believe buyers will be more likely to take their time in making a purchase.

Generally speaking houses prices go up when incomes go up (see graph below).  In many locations, house prices are due to catch up with average incomes – so we can expect growth.

However, it is difficult to see them doing more than catch up.   Most economists anticipate unemployment to increase slightly in 2014 (as we are seeing with Qantas and Holden) which will put a ceiling on house prices.

While the fundamentals are good, Accredited Broker believes that, in the cities that have experienced growth, the market is likely to plateau next year. The others will tick along nicely.

The easy part of 2014 is that we will remain in a low rate environment; some economists are even predicting further rate cuts.  Low home prices and low interest rates will make home ownership very affordable.  For the cashed-up buyer next year, purchasing will be relatively straight forward.

But, if your client wants to borrow at a high Loan Value Ratio, then 2014 may be a little bit tougher for them.  This year has seen mounting pressure to avoid clients racking up too much debt with high Loan Value Ratios and in this edition, Prof.  Rodney Maddock argues that the government may well be leaning on the banks to avoid people over-extending themselves when he says “APRA might well have had some conversations with the banks requesting them to keep the proportion of high LVR loans in their portfolios to below 15%.”

Similarly changes to the Privacy Act, due to come into force in March, mean that the credit rating agencies and banks will have access to different data on clients.  Next year, the habitual late-payer may also find it harder to get a loan.

But, the mortgage broking market is still growing.   Recent research by the MFAA shows that 46.4 per cent of home loans are now written by brokers and that they are on track to arrange $120 billion of loans by the end of 2013 – a new record.

So, if brokers are to be successful in 2014 what do they have to do?  The chances are that the brokers who succeed next year are those who manage a long term relationship with a client. Accredited Broker believes that next year’s winners will have the higher level skills; here are our top three suggestions:

1. Given the new credit regime and that arranging high LVRs will get tougher, it is important that clients’ applications are 100 per cent right.  Brokers may well have to get to know a client better before submitting an application.  They may even have to do more due diligence before submission (such as arranging their own credit checks).

2. Because purchasers will be less driven by a Fear Of Missing Out, they are more likely to ponder and reflect on a particular purchase.  To help them make up their mind, the successful brokers will be those who play the role of a trusted advisor.  If you can give them copies of RP Data valuations, you will greatly assist them.  Similarly if you know a good buyer’s agent, or if you can give them good local knowledge, you will stand out.

3. Brokers’ product knowledge will also be key next year.  While many lenders are making it tougher to borrow at high LVRs, others are launching new, innovative products for those with limited savings.

2013 has been a good year for the broking industry.  All of us at Accredited Broker wish you a happy Christmas and a prosperous 2014.

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