Citi helps navigate changing property climate

A broker-led model helps navigate changing property climate

IN Partnership with

Citi Branded Wealth is on the frontline helping brokers and their clients come to grips with new dynamics in the property market as it searches for direction

PROPERTY OWNERS and investors have a whole range of new issues to deal with now that the economy is entering a new and unfamiliar phase. Some of the burning questions revolve around fear of overpaying, the fixed versus variable interest rate conundrum, and borrowing capacity, according to Sunny Cheng, senior business development manager at Citi Branded Wealth. Living expenses, debt-to-income (DTI) ratios and confusion around various bank promotions and what they mean are also in the mix, he says. Until recently, there were record numbers of people seeking out pockets of value or looking to buy their dream home before it became unaffordable. But with the Reserve Bank of Australia lifting official interest rates another 50 basis points in July to 1.35%, and further increases expected over the remainder of this year, there is little doubt that property prices will continue to moderate.

National Australia Bank Limited (ABN 12 004 044 937, AFSL and Australian Credit Licence 230686) ("NAB") is the credit provider and issuer of Citi-branded financial and credit products. NAB has acquired the business relating to these products from Citigroup Pty Ltd (ABN 88 004 325 080, AFSL and Australian Credit Licence 238098) ("Citi") and has appointed Citi to provide transitional services. “Citi”, “Citibank”, “Citigroup”, the Arc design and all similar trademarks and derivations thereof are used temporarily under licence by NAB from Citigroup Inc. and related group entities.

Find out more

Value of new loan commitments for housing by segment* (exc. refinancing)

June 21

“We are continually implementing positive changes to simplify the home loan journey for our brokers and clients”

Sunny Cheng, Citi Branded Wealth

But Cheng says the best time to buy a home is still when you are ready. With unemployment at record lows, there remain many buyers who don’t want to put their lives on hold and are ready to purchase now. Many are seeking a trusted partner to ensure they purchase smartly, he says. Mortgage brokers say they are busy fielding enquiries on how the market situation affects decisions around property.

“There's been a lot of information for borrowers to take in and understand how their situation is changing, as the environment is changing at a rapid pace,” says senior mortgage broker Andrew Loucas at award-winning online brokering firm Loan Base. “Clients are worried they will pay too much in the current climate and are particularly wary about overcommitting themselves financially.” Current property owners coming off record-low fixed rates are

sometimes confused about what options are now open to them. “Many were keen to fix rates when we had record-low home loan rates on offer; however, in the span of a few months that completely flipped on its head,” says Loucas. “Given the large increases in fixed rates we’ve seen, clients are now more inclined to go variable.” Which way you go often comes down to an individual’s particular outlook on the future. But there are a range of new factors to consider that weren’t on the radar previously. “We’ve had to educate many of our clients on some impacts to borrowing capacity,” says Loucas. “With spaces for the First Home Loan Deposit Scheme running out, more clients are asking about lenders with no or reduced lenders mortgage insurance.” Brokers are also having to explain DTI ratios, the importance of living expenses in an inflationary environment, and an increasing number of new bank products.

Lending in a changing landscape The pandemic years have also changed the nature of the lending journey. “Clients are more willing to obtain a home loan without leaving the comfort of their home,” says Loucas. Loan Base brokers work with clients remotely at a time that’s convenient for them, which means clients are less likely to require a bank with local branches. This opens up new lending options for most. “We have found clients are also becoming self-educated, as they aren’t simply taking the lending option their local branch has offered, but instead consider the options of two or three lenders.” In times of volatility there is also the phenomenon known as the ‘flight to quality’. In the property market this references the rise in loans taken with the big four banks, as they are considered the safer lenders.

“Many were keen to fix rates when we had record-low home loan rates on offer; however, in the span of a few months that completely flipped on its head”

Andrew Loucas, Loan Base

In his experience, borrowers may look more closely at their lenders if economic conditions deteriorate, but brokers are always careful to consider the client’s overall situation and longer-term plans. “This helps us better manage their home loan needs and assist the client with achieving their financial goals.” Loucas says his key message to clients remains consistent. “We ask the client to speak to us to find out about their options, become more educated and work within their

financial means. In uncertain times, speaking to a team of experts can put buyers in a much better position moving forward and also help avoid possible heartache.” Simplifying the home loan journey Under National Australia Bank, the Citi Branded Wealth brand is well positioned to service brokers and their clients and has spent considerable effort pivoting to meet the challenges of the new climate. “We have adapted to the changing environment by introducing a simple Virtual ID Verification process for our broker business partners to ID their clients via virtual means and without the need to meet face-to-face,” says Cheng. Citi Branded Wealth also doubled the size of its credit team to provide faster ‘times to yes’ credit decisions. “In addition, we continue to offer credit policy niches such as our ‘85% No LMI’ policy to help first home buyers enter the property market with a smaller deposit.” Internet banking and mobile app functionality has also been upgraded to empower clients. “We are continually implementing positive changes to simplify the home loan journey for our brokers and clients,” he says. But the constant improvement in offerings doesn’t mean there is a lack of consistency. “We continue to offer exclusive intel to our broker business partners to keep them informed on current property market conditions, and we strive to offer real value and ensure we are competitive in the market,” says Cheng. All accredited brokers at Citi Branded Wealth have the expertise required to guide their clients, as well as the support of a team of business development managers, each of whom has more than a decade of experience in the mortgage industry. It is precisely because conditions are more volatile that people need to make better-informed decisions to safeguard their investments in the property market.

$O bn

$1O bn

$20 bn

$30 bn

$40 bn

July 21

Aug 21

Sept 21

Oct 21

Nov 21

Dec 21

Jan 22

Feb 22

Mar 22

Apr 22

May 22

Total value

Owner-occupier

Investor

*Seasonally adjusted

Source: ABS

Number of new first home buyer loan commitments*

Source: ABS

Number of loans

Month

*Seasonally adjusted

June 21

13,848

july 21

13,082

aug 21

12,503

sept 21

11,980

oct 21

11,505

nov 21

11,470

dec 21

11,804

jan 22

10,888

feb 22

9,946

mar 22

10,392

apr 22

9,978

may 22

10,211

“During the height of COVID-19 we had an increase in queries about lenders and if they were covered by the Australian government deposit guarantee,” says Loucas. “There was more hesitation going with perceived smaller lenders; however, we noticed that hesitation decline as Australia dealt with the pandemic.”

News

Mortgage Industry

Best in Mortgage

Specialty

Resources

Companies

People

Newsletter

About us

Authors

Conditions of Use

RSS

Companies

People

Newsletter

About us

Authors

Conditions of Use

RSS

News

MORTGAGE INDUSTRY

BEST IN MORTGAGE

SPECIALTY

Resources

Companies

People

Newsletter

About us

Authors

Conditions of Use

RSS

News

MORTGAGE INDUSTRY

BEST IN MORTGAGE

SPECIALTY

Resources