Opportunities ramp up for property investors

Despite recent challenges, property investors are coming back into the market and are looking to lenders and brokers that are nimble and flexible enough to meet their specific finance needs

THE SPRING selling season is just around the corner, and there are signs that Australia’s real estate market is turning around, which is good news for property investors. After being hit with 12 interest rate rises since May 2022 and fast-rising inflation, it’s been tough for investors, with many looking to refinance their loans to cope with these challenges. But the Reserve Bank of Australia is indicating that inflation is gradually coming under control and that the end of the rate-hiking cycle is nigh. Australian Bureau of Statistics lending indicators show that the value of new loan commitments for investor housing rose 2.6% to $8.7 billion in June 2023, although it was 15% lower year-on-year. MPA approached some of the leading lenders in this space, including Bankwest, CommBank, Gateway Bank, La Trobe Financial and Pepper Money, to hear their insights on property investor trends,

“These states are providing strong returns and have very low vacancy rates,” he says. “As a result, we are seeing an uplift in investor interest from interstate buyers who have strong equity and cash flow.” CommBank provides free property and suburb reports so clients can access the latest information on new listings, auctions and sales as well as suburb profiles to help investors make informed property decisions. Baumann says CommBank products such as Property Share are becoming more popular. Clients can purchase their first home or investment property with another party who isn’t a spouse, while retaining individual control of their finances. “It’s a unique offering in the market which has been utilised more for investor purchases.” At La Trobe Financial, Cory Bannister, chief lending officer, says the non-bank has been encouraged by its origination volumes over the past three to six months, which include both new residential and commercial investor loans.

Bannister says borrowers simply want three things: 1. They want to be listened to. It’s possible that a customer has been rejected by their trading bank because ‘the computer said no’, likely due to the breaching of a ratio covenant. The customer wants someone to listen to their circumstances with an open mind. 2. They want advice. They’re often confused and possibly a little dejected, and this is a great opportunity for a mortgage broker to showcase their value proposition of choice, advice and a fair go – guiding the customer through what is often a short-term ‘life event’. 3. They want a solution. This is their ultimate objective: to find an appropriate and suitable solution that satisfies their goals. Once a solution is found, borrowers are extremely comfortable.

Jun 07

Uptick in new finance commitments

Saoud says that while no one is immune to interest rate increases, savvy investors can be less rate-sensitive than owner-occupiers and more equipped to handle interest rate fluctuations and adapt accordingly. “Interest rates can still influence their investment decisions, especially when considering the overall financial viability of a property or portfolio, but in markets with very strong rental yields, mortgage repayment increases may be offset by higher rental yields. So in some cases a 2 or 3% rate increase on the mortgage may be offset by a 10% or more increase in rental return.” That’s why market conditions in cities such as Sydney, Brisbane and Melbourne may be enticing for those investors who have the capital, equity and appetite for risk, particularly as they take full advantage of higher rental yields, Saoud says.

“It’s been well reported that Australian borrowers are resilient, with loan arrears and delinquencies yet to show significant deterioration as some predicted,” Bannister says. While credit growth has slowed due to the interest-rate-hiking cycle, “property investor credit demand remains steady inside the four walls of La Trobe Financial”. “There are plenty of borrowers ‘on the ‘offence’ that require a lender – and broker for that matter – that can provide a tailored lending solution, allowing them to seize opportunities that suit their property investment objectives,” Bannister says. Pepper Money general manager, mortgage and commercial lending Barry Saoud says some media have predicted that investors will retreat from the market by the end of 2023. “However, ABS figures echo what we’re seeing at Pepper Money,” he says. “Investors remain as a strong cohort, especially in the non-bank world.”

Bankwest’s vision is to be a simple, easy bank for the Australian homeowner of today and tomorrow, and its purpose is to build a brighter future for all. Bankwest provides personal and everyday banking solutions for customers across Australia, supporting them in doing their banking in the ways that suit them, with innovative digital solutions, an Australia-based 24/7 Contact Centre, a passionate broker community, and in-person options through its WA branch network and Bank@Post partnership, providing access to more than 3,500 outlets across the country.

Find out more

At CommBank, we know brokers deliver exceptional outcomes for customers, which is why we’re focused on delivering simpler, better and easier processes to provide brokers with an enhanced level of support every step of the way. Our strategy has been designed based on broker feedback and focuses on how we can improve the experience and build a strong and more sustainable third party banking channel that helps you – our broker partners – to support more customers in achieving their homeownership goals. If you’re not already accredited with CommBank, now is a great time to join us, as we’ve simplified our accreditation process. Head to www.commbank.com.au/home-loans/broker-accreditation.html to find out more. If you are already accredited with CommBank, check out our free 24/7 training hub – it’s all part of our commitment to being better together and supporting you every step of the way.

Find out more

Drummond says this complements Gateway’s fast-growing and award-winning owner-occupier Green Home Loan, which offers a 0.25% p.a. discount on its Package Investor offering for the life of the loan on properties that have met a certain energy-efficiency rating. Rakhit says Bankwest is committed to helping investors make their goals a reality and backing brokers to help their investor clients in challenging market conditions. Enhancements to Bankwest’s serviceability calculator in the broker portal have helped increase investors’ borrowing capacity, with a key change being the reintroduction of negative gearing. Rakhit says this will automatically be applied to loans marked as ‘investment’ in the serviceability calculator where rental income is also being received.

Gateway Bank is one of Australia’s leading customer-owned banks and has been in operation for over 60 years. Gateway offers a wide range of products and services covering everyday banking, home loans, personal loans, reverse mortgages and commercial mortgages. Our Green Plus Home Loan has been recognised by Mozo as Australia’s best Green Home Loan in 2022 and 2023 and by Finder as Australia’s Best Green Home Loan 2023, underpinning the bank’s commitment to our ‘Pocket & Planet’ purpose.

Find out more

Michael Baumann, CommBank

Hand holding magnifying glass and looking at property model with row of coin money. Property investor opportunities.

In Partnership with

Bankwest general manager third party Ian Rakhit says Bankwest strives to be the best bank for brokers by being simple and easy for Australian homeowners. “Recent policy changes to improve serviceability for investors appear to have had a strong impact,” he says. “Our data reveals applications for investment loans increased to 42% in the first six months of 2023, compared to 32% for the same period last year.” Zeb Drummond, chief operating officer at Gateway Bank, says that much like in the owner-occupier space, Gateway is seeing more enquiries and applications for refinances than purchases in the investor space. “The impact of increasing rates and inflation is driving investors to look for more competitive rates and structures to ease the cost pressures,” he says. “Undoubtedly the past 12 to 18 months have provided increased challenges for property investors, but in any challenging period there are pockets of opportunity for those in the position to take advantage.” Drummond says that as cost pressures began to bite, “we did see strong growth in our basic investor offering as borrowers were driven by rate”. “We have seen this level off and now are seeing packaged product enquiry grow in the investment space.” CommBank executive general manager home buying Michael Baumann says investors are looking for value in lower-cost interstate markets such as WA and SA.

Drummond says uncertainty on rates in the next six months will play a role in keeping property investors cautious. “Once that uncertainty ends and there is a level of stability around

“There are plenty of borrowers ‘on the offence’ who require a lender and broker that can provide a tailored lending solution, allowing them to seize opportunities that suit their property investment objectives”

Cory Bannister, La Trobe Financial

lending opportunities and how mortgage brokers can tap into this market.

Ian Rakhit

Bankwest

Zeb Drummond

Gateway Bank

Michael Baumann

CommBank

Cory Bannister

La Trobe Financial

Industry experts

Cory Bannister is senior vice president and chief lending officer at La Trobe Financial. He has a rich understanding of both the loan origination process via the third party channel, as well as the approval and settlement of institutional and retail loans. Bannister’s portfolio management experience extends to the selection and allocation of assets for multiple wholesale mortgage portfolios in excess of $1 billion. He has been responsible for the management, review, risk profiling and audit of wholesale asset pools, and has had conduct of the relationships with substantial wholesale and retail investors, with responsibility for overseeing related reporting.

La Trobe Financial

Cory Bannister

Michael Baumann has been in the industry for over 28 years, with 13 of those at CommBank. He spent the first part of his career in strategy at Boston Consulting Group before he moved to CommBank to work in Everyday Banking and Consumer Finance. Baumann is now executive general manager home buying, leading a team that supports Australians in realising their homeownership and investment goals. The home buying team serves internal and external partners who deliver exceptional experiences for customers, and covers the value chain, including broker/head group relationships, product design and delivery, policy and pricing decisions, acquisition and retention strategies, technology, data, risk and operations capabilities.

CommBank

Michael Baumann

Zeb Drummond has over 18 years of banking experience, having worked across a range of disciplines in a variety of organisations, from the big banks to customer-owned banks, and has been at Gateway for eight years. As chief operating officer, Drummond currently leads Gateway’s sales and operational teams, including the direct and third party sales functions, the customer service teams and the lending origination, settlement and transactional service teams. He also manages the relationship with Gateway’s broker aggregator partners.

Gateway Bank

Zeb Drummond

Bankwest general manager Ian Rakhit first led the bank’s third party team in 2010. He is an experienced leader with extensive skills across broker, colleague, customer, compliance, cost and outcomes and has led both first party and third party teams. Rakhit has an extensive banking track record internationally. He joined Bankwest in 2007 from the UK, where he led the broker team for more than a decade. Rakhit prides himself on his ability to communicate at all levels, to ensure the customer is always at the heart of decisions made, and to show genuine care for his team, brokers and customers.

Bankwest

Ian Rakhit

Bankwest

Zeb Drummond

Gateway Bank

Michael Baumann

CommBank

Cory Bannister

La Trobe Financial

Industry experts

La Trobe Financial

Cory Bannister

CommBank

Michael Baumann

Gateway Bank

Zeb Drummond

Bankwest

Ian Rakhit

Market trends

Looking ahead

Published 28 Aug 2023

Zeb Drummond

Gateway Bank

Michael Baumann

CommBank

Cory Bannister

La Trobe Financial

Ian Rakhit

Bankwest

Barry Saoud

Pepper Money

Industry experts

Barry Saoud joined Pepper Money in July 2021 as general manager, mortgages and commercial lending, and is responsible for its strategic direction and operating performance across product, credit and settlement sales functions for Australia and New Zealand mortgages, commercial loans, personal loans and direct sales. With over two decades’ experience in financial services, Saoud has held numerous roles across areas ranging from legal to company secretary to sales and product management at the likes of Aussie (Home Loans), GE Capital, HSBC and Norton Rose Fulbright. He is a passionate leader with proven ability to grow businesses and exceed targets through innovative strategy and effective execution.

Pepper Money

Barry Saoud

Bankwest

Ian Rakhit

Gateway Bank

Zeb Drummond

CommBank

Michael Baumann

La Trobe Financial

Cory Bannister

“The impact of increasing rates and inflation is driving investors to look for more competitive rates and structures to ease the cost pressures”

Zeb Drummond, Gateway Bank

“Our data reveals applications for investment loans increased to 42% in the first six months of 2023, compared to 32% for the same period last year”

Ian Rakhit, Bankwest

“Helping clients to get ahead through property investment can be hugely satisfying. That’s why we see some brokers specialising in the space. We love working with them to help their clients succeed”

Barry Saoud, Pepper Money

La Trobe Financial is one of Australia’s leading alternative asset managers, with $17 billion in assets under management. Since 1952, La Trobe Financial has been driven to help people realise their potential with specialist financing and investment solutions.

Find out more

Pepper Money is a people-focused non-bank providing a refreshingly real-life approach to lending across home loans, commercial loans, equipment finance and car loans. We work with all sorts of people and businesses, from blue-collar to blue-chip. Whatever the circumstances, we take a uniquely flexible human approach, assessing each person’s situation individually. Since 2000, we have helped well over 375,000 Australians achieve their financial goals, often when other lenders have said no. We’re humbled to be consistently recognised as Australia’s leading non-bank lender, known for being broker-friendly with supportive and responsive BDMs, having a brand that’s recognised and trusted by its customers, and offering a wide range of products that meet different customer needs, especially for non-conforming and self-employed customers.

Find out more

Sources: ABS Lending Indicators, June 2023; CoreLogic

Jun 09

Jun 11

Jun 13

Jun 15

Jun 17

Jun 19

Jun 21

Jun 23

$2,500

$7,500

$12,500

$17,500

$22,500

$27,500

Owner-occcupiers

Investors

Monthly value of new finance commitments, total ($ millions)

Source: CoreLogic Monthly Housing Chart Pack, August 2023

Oct 2005–Apr 2009

Sept 2009–May 2013

Historic national upswings in Australian rent values

10%

15%

20%

25%

30%

35%

Growth in national rents reached 35 consecutive months in July 2023, the longest stretch since 2013

Various, 2013–2020

Sept 2020–July 2023

and detailed conversations with clients and allows brokers to present solutions that will really work for their clients.” Different types of investment home loans allow clients to achieve different results, and having a thorough understanding of product options empowers brokers to best support their clients. Baumann says CommBank has tools and calculators that brokers can use to help their clients plan their property investments. “For example, our calculators can support [them] in understanding what loan servicing could look like, and our budget planner can help provide a clear overview of spending and saving capacity.” The bank’s property and suburb reports also provide the latest information on new listings, auctions and recent sales, as well as suburb profiles, to help clients make informed decisions. Saoud says the investor cohort is a world of opportunity for brokers who are looking to diversify, especially if they are experiencing a dip in owner-occupier new business. “Property investor clients often have a diversified investment portfolio, which means their financial wellbeing is not solely dependent on the performance of a single property,” he says. This diversification helps reduce their sensitivity to interest rate fluctuations compared to owner-occupiers. Understanding how to add value for those investor clients is key to building the relationship, Saoud says. Basic relationship management is important, but so is offering access to strong accounting referral partners. “Your investor clients are going to be highly engaged around understanding their options when it comes to tax deductions and benefits. So it’s important to ask your investor clients if they are maximising all the expenses from their taxable income, and if their accountant is providing them with tax advantages that can mitigate the impact of higher interest rates.” By doing this, brokers can influence their clients, which helps to keep them for life, Saoud says.

La Trobe Financial’s service proposition has always been to help borrowers with their credit needs when others have retreated from the market or chosen to overlook high-quality borrower segments, Bannister says. “A broker familiar with the suite of La Trobe Financial loan products will nearly always have a solution to a borrower’s needs, be that for investment purposes or otherwise.” Baumann says understanding clients’ needs and goals remains one of the most important considerations for brokers looking to support investor clients. “This level of understanding can only be developed through ongoing

Drummond says brokers should continue to do what they do best – stay close to their clients, be across where they are in their life cycle, and ensure they’re aware of the options available in the market. “This is never more important than in challenging times,” he says. “The brokers we see successfully diversify into this market are those that continue to build and leverage their referral networks – real estate, accountants, legal firms – and those that understand and engage their client base.” Gateway not only has a great dedicated broker team but continues to look at how it can support this segment through its products and services, says Drummond. In keeping with its ‘Pocket & Planet’ approach, the customer-owned bank has just launched a new Investor Green Plus Home Loan.

“Another change is a reduction in the shading applied to rental income, which has further improved servicing capacity – except for some restricted mining town postcodes,” Rakhit says. “Dynamic LVR in the Pricing Tool removes the need for a manual AVM [automatic valuation model] to be ordered – and, to make it easier for customers who hold a trust or company, we’ve simplified and reduced the documents required for verifying income.” When using PAYG wages paid from the client’s business, with no reliance on business income, just a payslip or personal tax return, along with evidence the business is operating profitably, is needed. Rakhit says these tools empower brokers to support investors, whether they’re starting their investment property journey, looking to refinance, or wanting to increase their borrowing to expand their portfolio.

Opportunities for brokers

Rakhit says for the investor who wants the lot, Bankwest’s Complete Variable Home Loan Package comes with 100% offset accounts and an eligible credit card. “But this year, we introduced the Bankwest Simple Home Loan, which gives investors a no-fuss option with a broader LVR appetite and fewer fees – a popular option in a rising-interest-rate environment. “We’re also simplifying our offering behind a few hero products, creating a clear and accessible banking experience for homeowners, and supporting brokers to prioritise their clients’ needs with the right options.” Rakhit says Bankwest’s unique case-ownership model and one-stop-shop Bankwest Broker Portal means its “broker network is empowered to self-serve most of their requirements, and, when they need us, our support colleagues are always available”.

Bannister says the property market has shown remarkable resilience, and while values have moderated a little, owners have preserved much of the growth they enjoyed in the run-up to the current rate-hiking cycle. “The outlook continues to look more prospective as we approach terminal rate level, primarily based on a number of structural and economic tailwinds,” he says. Factors to consider include net overseas migration, with another 400,000 people now calling Australia home and the federal government forecasting a cumulative 1.5 million migrants arriving in the next five years. Bannister says an undersupply of housing is causing rents to rise rapidly, and the solution – to build more houses – is also affected by industry challenges. “These structural dynamics when combined could spell success for property investors, who are likely to see rents and capital values improve as a result of a further lack of housing.”

“The CommBank My Property experience in NetBank and the CommBank app provides personalised property insights that change dynamically over time, allowing the client to track and manage their property portfolio and explore their options,” Baumann says. “Clients can also easily contact their broker through NetBank and the CommBank app, with their broker’s information accessible in just a few steps.”

Loans for investors

The non-major bank is also transforming to realise ambitious goals, including a clear ambition to serve more home loan customers nationwide. “With 80% of our home loan disbursals broker-originated, we have a goal to be the leading bank for brokers across Australia,” Rakhit says. Bannister says La Trobe Financial’s product suite is unmatched in the non-bank sector for breadth and depth and has been modelled on having a product for every ‘life stage’. “Our range of Full Doc and Lite Doc® investment loans assist mum-and-dad investors right through to property developers and professional investors, with loan sizes of up to $25 million [terms, conditions, fees, charges and La Trobe Financial lending criteria apply].” La Trobe Financial’s Lease Doc product is proving popular among commercial property investors who use a third-party tenanted commercial security and rely solely on rental income to achieve serviceability on a standalone basis. Bannister says rising interest rates often cause headaches for commercial borrowers, particularly if they have ongoing review clauses and covenants attached to their loans from major lenders. “We are finding an increasing number of brokers turning to us for assistance for ‘set and forget’ commercial property loans.” He encourages brokers to consider non-bank alternatives to ensure their clients aren’t left in a tricky situation due to ongoing review clauses. Drummond says Gateway’s green lending options offer a compelling rate in the market for those who fit the criteria. “More broadly, our Investment Premium Package and Low Rate Essentials offering both remain competitively positioned in the market, combined with accepting 80% of rental income for servicing.” At CommBank, Baumann says the offering includes a wide range of investment home loans that can be tailored to suit clients’ needs. Features include repayment holidays, multiple offset accounts, redraw, split loans, top-ups, and flexible repayment options such as switching to interest-only payments.

rates, we should see more investors come back into the market with confidence. Rental demand appears to be remaining strong despite increasing rents, which will keep the market appealing for those looking to grow their investment portfolio or enter the market for the first time.” Saoud says property investors are more likely to have a deeper understanding of the real estate market, financial trends and economic conditions, which makes for interesting conversations and an engaged cohort. “Their expertise allows them to make informed decisions and respond strategically to changes in interest rates … helping clients to get ahead through property investment can be hugely satisfying,” he says. “That’s why we see more and more brokers specialising in the space. We love working with brokers to help their investor clients succeed.” Baumann believes increased migration, low rental vacancies and increasing property values will present opportunities for property investors over the next 12 months. “While the level of opportunity will be guided by future interest rate movements, there are several indicators pointing to the market remaining buoyant,” he says.

Companies

People

Newsletter

About us

Authors

Conditions of Use

Terms & Conditions

Sitemap

RSS

Resources

News

Specialty

Best in Mortgage

Mortgage Industry

29.3%

28.2%

15.0%

Months

deal assessment flexibility: Pepper Money offers a 2% buffer across all products, with additional flexibility for investor clients with lower LVRs and higher credit ratings. policy options: Pepper Money has a range of levers that can be hugely attractive to investor clients, including no DTI, no cash-out restrictions, no notional rent, no genuine savings, no professional investor loading, no lenders mortgage insurance, actual payments on OFI debts (+25% buffer), and unlimited debt consolidation options, including for business and ATO debts. speed of response: The non-bank offers rapid deal assessment, including market-leading SLAs. A deal in by 11 am means the assessment is back the same day.

Pepper Money has a new Red Hot Rates promotion with significant reductions across home and commercial loans, Saoud says. “Our competitive rates are particularly hot for investor clients right now – along with our fresh approach to serviceability, and how quickly we can deliver a yes for a client.” Saoud says a number of lenders offer home loans for investors, but they may not all satisfy the client’s specific investment goals, or the client may face borrowing capacity challenges. “Savvy investors often strategically use several lenders to achieve their investment goals,” he points out. Pepper Money offers many flexible loan products to suit investors, and Saoud says these are growing in popularity due to the lender’s:

Barry Saoud

Pepper Money

Barry Saoud

Companies

People

Newsletter

About us

Authors

Conditions of Use

Terms & Conditions

Sitemap

RSS

News

MORTGAGE INDUSTRY

BEST IN MORTGAGE

SPECIALTY

Resources

Barry Saoud

Pepper Money

Barry Saoud

Companies

People

Newsletter

About us

Authors

Conditions of Use

Terms & Conditions

Sitemap

RSS

News

MORTGAGE INDUSTRY

BEST IN MORTGAGE

SPECIALTY

Resources