The RBA decided to once again leave the official cash rate unchanged at 1.5%

The Reserve Bank of Australia decided to once again leave the official cash rate unchanged at 1.5% with the last rate move back in August 2016.

With a combination of retail deflation (ie the price of retail goods falling) and continued weak wages growth still impacting economic growth, the Reserve Bank have signaled that we can expect to see rates where they are for the time being. They have indicated however that they expect the next rate move to be an increase and are concerned about the potential shock that this may cause the economy.

Even when rates are unchanged, the role of your broker remains the same. There may be different rates available from our lenders, so your broker is always on hand to ensure you have the right financial solution for your current circumstances.

If you’d like to have a chat about what today’s news means for you and your finances, please don’t hesitate to get in touch with an AFG broker.

Australian Finance Group acquires strategic interest in Thinktank

Australian Finance Group Limited (ASX: AFG) is pleased to announce that it has entered into a binding agreement to make a strategic investment of 30.4% (fully diluted) of Think Tank Group Pty Ltd (“Thinktank”) for $10.9 million in cash consideration. In connection with the investment, AFG will distribute a white label Commercial Property product through its network of brokers.

Thinktank operates primarily as a small ticket (sub $3m) commercial property lender and was established in 2005. Thinktank operates nationally and has a loan book in excess of $750 million. It has established itself as a viable and competitive non-major commercial property lender in a sector that has been bereft of competition and choice for too long.

AFG Chief Executive Officer David Bailey explained the decision: “Our strategic investment in Thinktank represents the next evolutionary step for AFG to diversify its earnings base. The ongoing success of AFG Home Loans and the introduction of AFG Business are important contributors to the future growth of AFG. It makes sense to participate further in an asset class that we are comfortable with – both directly through the white label opportunity and indirectly through our shareholding to generate further earnings for AFG.

“The opportunity to blend Thinktank’s commercial property lending expertise with our own distribution and securitisation capability will benefit both businesses. It will also enable us to deliver further competition and choice to the small to medium enterprise (SME) market place at a time when it is most needed. AFG aims to bring the same disciplines to this white label proposition as we have successfully demonstrated with our own residential white label programme,” added Mr Bailey.

Thinktank CEO, Jonathan Street, commented: “The agreement reached with AFG marks a further significant step forward for our business and serves to further enhance our capacity to best service the finance needs of borrowers over the breadth of the Australian commercial property market.

In coming together, we see considerable opportunity to not only combine our efforts to great effect across the AFG network but equally in extending the same emerging advantages and benefits to our wider base of aggregation and broker relationships.”

Investment highlights:

  • Investment of 30.4% (fully diluted) of Thinktank Group Pty Ltd (“Thinktank”) for $10.9 million in cash consideration
  • Addition of a white label commercial property mortgage to AFG’s product offering with a strategic alignment with AFG’s commercial broking platform, AFG Business
  • Opportunity to increase Thinktank’s penetration of the market through AFG’s 2,900 strong broker network
  • Thinktank is expected to achieve profit after tax in FY18 of approximately $3.2 million
  • AFG has the right to appoint two directors to the Thinktank board and they will take up those positions immediately
  • Completion is expected to occur today following the transfer and confirmed receipt of consideration.

Download Market Release

Productivity Commission submission and request for information

I would like to share with you AFG’s response to the Productivity Commission’s Draft Report on Competition in the Australian Financial System. As you are aware we have been engaging with the Productivity Commission over and above the submission process and they have asked AFG to collate some real examples of the work you do to help your clients and drive competition. Click here to complete the survey. There is a tight turnaround on this request, please complete by next Thursday 29th March.

With last week’s headlines taking aim at our sector, I would like to provide some balance to the noise. It is very disappointing that a Royal Commission ostensibly set up to look into the poor behaviour of the banking sector has evolved to also consider the mortgage broking industry – an industry which for over twenty years has brought competition into the mortgage market place. However, given we now represent over half of all mortgages originated in the industry, it isn’t surprising.

We do however have concerns that the backdrop of the Royal Commission will be used to leverage a better commercial outcome for those organisations which are the primary focus of the Royal Commission, the major lenders.

  • The primary regulator of mortgage broking – ASIC – have recently completed a full review of the Broker Remuneration Model. ASIC indicated that the model is not broken rather it needs some ‘tweaks’. These tweaks have been proposed by the Combined Industry Forum (CIF) which is a group of bankers (including the big four and the ABA), other financial institutions, brokers, aggregators and others who have come together to address the proposals outlined by ASIC. The industry have actually moved to implementation phase of these responses and in many aspects have commenced making changes to previous ways we did business. Examples include the abolishment of bonus payments to brokers, a rationalisation of the array of soft dollar payments as well as changes to how brokers are remunerated on settlement. When combined with increased regulation and surveillance of the channel by ASIC, these changes make for a more robust and responsible industry that continues to be focused on good consumer outcomes.
  • AFG have been an advocate for competition and choice for Australian consumers since it began business, 25 years ago It is why we have 45 lenders on our panel and we are proud of the fact that of all our originations, more than 35% are to non-major lenders – the very same non-major lenders who would be unable to distribute their product and bring competition to the industry without a broker channel.
  • If banks had a more cost effective option to originate mortgages they would use it. Banks accept that the broker channel is how consumers want to access their products.
  • The broker channel provides choice, convenience and competition for Australian borrowers. It is why we originate over 50% of all mortgages in the country and also why this share has grown from around 38% just after the GFC when there was less competition in the market. Without the broker channel, don’t think for a second consumers will be better off.

Whilst the headlines have largely focussed on the Royal Commission this week, there were two other important news releases that are worth noting:

  1. The first was the ACCC’s report into interest rates of the big banks. Conclusions were that pricing was opaque. Without a broker helping their client to navigate the more than 3800 offerings in the market place, how is that client expected to get the right product?
  2. The second was APRA’s announcement that 100 branches have been closed by banks over the past 12 months. Does anyone else think it strange that if the proprietary channel was an efficient means of origination they would be closing branches?

There are estimates of around 16,000 mortgage brokers out there supported by thousands of small businesses who every day go to work to find a better outcome for consumers. At AFG we tell you, our brokers, to concentrate on the outcome for the consumer and the rest will look after itself. I am sure there are other broking groups with a similar mantra. I would encourage you all to keep doing what you do best, helping your clients.

Regards,
David Bailey
CEO

Mortgage brokers in the mix

AFG (ASX: AFG) has today called on the banking Royal Commission to recognise the significant inquiries that have already been conducted into the mortgage broking sector and the important role mortgage brokers play in the Australian lending market, as the government outlines the inclusion of mortgage brokers in the scope of the banking Royal Commission.

“The mortgage broking channel accounts for more than 53% of the Australian lending market so it is unsurprising that we are in the mix, however 2017 has also been marked by significant regulatory scrutiny of our industry,” said AFG CEO David Bailey.

“The ASIC Review of mortgage broker remuneration and the ongoing Productivity Commission inquiry into competition in the financial system have both looked at the structure of the mortgage broking sector.

“We are confident Justice Hayne will recognise the unprecedented data collection process conducted by ASIC in their Review of mortgage broker remuneration has thoroughly examined our industry.

“The ASIC report recognised the important role that mortgage brokers can play in promoting good consumer outcomes and strong competition in the home loan market and we are confident any other examination of our sector would find the same,” said Mr Bailey.

The Combined Industry Forum (CIF), made up of representatives from across the mortgage industry, has submitted a report to government that outlines a package of reforms to address the proposals made in the ASIC review.

“The Productivity Commission is also undertaking a significant examination of the competitive landscape and mortgage brokers are a key lynchpin in providing that competition.

“The Royal Commission, and the industry as a whole, needs to focus on how competition can be further improved and this should include the impact the government guarantee has on competition.

“Ultimately, the findings of this inquiry should assist the government to promote a competitive and stable financial industry that contributes to Australia’s productivity,” said Mr Bailey.

“The mortgage broking sector provides vital competition to deliver on that aim.

“AFG has 45 lenders on its panel with more than 37% of borrowings going to lenders other than the four major banks, and we remain committed to ensuring choice and competition remains for Australian consumers.

“This competitive tension ensures consumers continue to have choice and most importantly benefit in terms of home loan price and service because of the service brokers deliver on a daily basis across the Australian lending market,” he concluded.

Download full media release: Mortgage brokers in the mix

Introducing AFG Suite

2017 has been an impressive year for so many of our 2850 brokers around the country, and for the industry more broadly. With broker market share now widely reported at around 55% there are many reasons to celebrate and also many ways to capitalise to ensure our continued growth.

Looking forward to next year, we have a really exciting announcement to share with our brokers. Our teams have been building new technology from the ground up, creating a new suite of technology tools we will be launching early next year.

You can watch our quick video to give you an idea of some of the new features coming your way.

Needless to say, we’re making life a lot easier and a lot more intuitive for you next year, with some very clever technology to bring your key data under the one roof, allowing you to view and manage it like never before.

We’ll be sharing more about each new product as we are closer to rollout in the new year.

AFG announces new referral arrangement with Lifebroker

Australian Finance Group (ASX:AFG) is pleased to announce the appointment of Lifebroker to AFG’s life insurance referral program. The new arrangement will make it easier for AFG’s 2850 brokers to offer life insurance referrals to clients, providing them with a wide choice of options for their needs from Lifebroker’s range of comprehensive life insurance products.

Mark Hewitt, AFG General Manager Broker & Residential, said, “I’m delighted to announce that we have chosen Lifebroker, a TAL Group company, for our new life insurance referral service. This new arrangement strengthens our 10-year relationship with TAL and I’m pleased that we have been able to evolve our life insurance offering to better meet the needs of our broker’s clients.

“Lifebroker offers specialist life insurance comparison services, featuring eight of Australia’s leading life insurance companies. With an extensive range of fully-underwritten products – equal to those accessed through a financial adviser – our clients can be confident that they are being looked after by the best in the industry,” said Mr Hewitt. “This is a great value-add to the services our brokers provide to their clients.”

The service for life insurance referrals will give clients access to the price and product comparison services provided by Lifebroker across the following types of insurance: life insurance, income protection, total & permanent disability insurance, trauma insurance, business expense insurance, and life insurance through superannuation.

Alex Homer, Lifebroker CEO, said, “We look forward to working with AFG to give their clients more choice and control over their insurance options. Lifebroker’s goal is to help Australians make better-informed decisions when it comes to life insurance and income protection cover, and this partnership will play a key role in enabling us to do this.”

The life insurance referral program commences today and brokers can opt-in by contacting their AFG relationship manager.

Download Media Release: AFG announces new referral arrangement with Lifebroker.


Media Contacts

AFG
Alison Clarke
Head of Corporate Communications AFG
+61 402 781 367 | mdmedia@afgonline.com.au
www.afgonline.com.au

Lifebroker
Brannon Valmadre
Illuminate Communications
+61 2 8583 6905 | +61 439 688 863
Brannon.Valmadre@illuminatecomms.com.au

 

Reserve Bank of Australia has again opted to leave the official cash rate on hold at 1.5%

With celebrations for the race that stops a nation in full swing, the Reserve Bank of Australia has made this decision.

The Reserve Bank of Australia decided to once again leave the official cash rate unchanged at 1.5%. The rate has not changed since September 2016.

This outcome was widely predicted by financial commentators. With inflation seemingly well under control and the Sydney property market now showing signs of cooling, many are predicting that the next rate change may not come until well into 2018.

Regardless of whether rates move up, down or stay the same, your mortgage broker’s role remains unchanged. Your broker is always on hand to ensure you still have the right financial solution for your current circumstances.

If you’d like to have a chat about what today’s news means for you and your finances, please don’t hesitate to get in touch with your broker.