From staggered clawbacks to lowered serviceability buffers, brokers have reacted to a series of product changes from lenders as they increase the competitiveness of their products.
With non-banks and mortgage providers not bound by APRA’s 3% serviceability buffer, many have made it a point to reduce certain product ranges to 2% to accommodate a wider range of borrowers.
Veronica Vojnikovic (pictured above left), director of Vevo Financial Services, said “it’s about time” that lenders reviewed their clawback and servicing policies to provide more “fair and holistic” solutions.
“Mortgage brokers are the driving force behind homeownership, providing essential expertise and support to homebuyers and refinancers,” said Vojnikovic who was recently an excellence awardee for Young Gun of the Year at the 2023 Australian Mortgage Awards.
“Fortunately, there are lenders who have introduced innovative solutions to assist borrowers and brokers alike.”
One non-bank lender that has taken on this challenge is Bluestone Home Loans.
In September, Bluestone announced a raft of policy changes including removed notional rent requirements, increased LVR and loan amounts, and increased maximum exposure limits.
This was followed by another round of changes a month later, where it eliminated minimum liquidity requirements for SMSF funds post settlement and increased the maximum loan term to 40 years.
Capping it off, Bluestone also reduced its servicing buffer to 2%. Mortgage broker Brenden Lowbridge (pictured above right), director of Newcastle brokerage Money Links, said this was “great to see”.
“I have also noticed some of the major changes in the commercial space,” Lowbridge said. “As we near or arrive at the top of the interest rate rising cycle, it is logical that there is less buffer applied than there was when the cash rate was close to zero.”
Vojnikovic agreed and welcomed the changes – especially since it had become “increasingly evident” that Australians were struggling with rising cost of living pressures.
“The servicing buffers in place should also consider these types of scenarios and allow clients to move freely,” Vojnikovic said.
With the pressure rising on Australian borrowers, some may be subject to adverse financial situations that could jeopardise their loans.
For this reason, Vojnikovic said lenders should also consider reducing clawbacks to make it fair on brokers.
“The trajectory of the mortgage broker market share is one that has been well earned,” Vojnikovic said.
“You can’t control your client’s personal circumstances post settlement, a divorce, a job loss, or a mental health crisis could result in the unexpected sale or refinance of a home, brokers should not be penalised for their hard work and time.”
Mortgage provider Rate Money answered this call in October, significantly reducing its clawback policy.
On its Think Money products for loans up to $2.5 million, clawbacks have been reduced to 75% for loans held less than nine months old and 50% for loans less than 12 months old.
Lowbridge said that while he believed “no broker should work for free”, Rate Money’s staggered approach to clawbacks was “fair to both lender and broker”.
“The brunt shouldn’t be worn by one side,” he said.
Rate Money has also clawbacks abolished clawbacks completely for the sale of properties through this product line along with all valuation fees and application fees for customers.
This is on the back of removing clawbacks on its House Money product line earlier in the year.
Both Vojnikovic and Lowbridge welcomed this news.
“Clawback due to client having sold the property is an excellent initiative also and demonstrates Rate Money are in the broker’s corner,” said Lowbridge. “They are also an excellent solution for investor clients and self-employed clients who would otherwise not meet servicing requirements with mainstream lenders.”
Vojnikovic said Rate Money’s reduction on their clawbacks was a “significant step forward” for this industry.
“We need to continue evolving as an industry for the benefit of our clients,” she said. “Brokers should not have to worry about external and unwarranted pressures caused by clawbacks, in actuality it harms the client broker relationship, I would hope other lenders start to follow Rate Money’s lead.”
Looking forward, Lowbridge said an amortised approach that reduced the brokers exposure every month that the loan was in place should be implemented by lenders “at the very least”.
“This can continue until the lender has recouped the cost in establishing the loan, for example 12 months, at which point no clawback should apply,” Lowbridge said. “It is in the brokers and the banks best interest to ensure the client is satisfied with their product.”
