Lending Solutions | 2018 in review and what’s new in 2019

By Phil Ringuet

Phil Ringuet

Happy New Year and welcome back!

Last year we saw a number of substantial changes within the finance industry which will certainly be food for thought moving into 2019 and beyond.  Here are some of our thoughts on what happened and more importantly what’s in store for the future…

So what happened in 2018?

Two heavily publicised issues will have had bankers and finance professionals on edge throughout 2018 and will likely haunt the industry for some time to come when considering 2019.

Royal Commission

2018 saw the Royal Commission swing into gear and the financial services sector take a collective “hiding”. The findings of the Royal Commission highlighted negligence across many aspects of the banking system with a particular focus on Personal Finance, Superannuation and Small business lending practices. This in turn has seen banks perhaps overreach in terms of policy and process to ensure that once findings are returned they can say “we dealt with that and then just for good measure went even further……”.

Broadly speaking a lot of the findings were actually identified and dealt with some time ago (albeit it internally) meaning that any subsequent policy and process changes were likely unnecessary and more of a PR stunt. The key take out of this is don’t expect the banks to do you any favours in 2019 in terms of your finance application. Well prepared and strong applications will always find a home which brings me back to the old adage “Fail to prepare and prepare to fail”. So really just get the conversation started early…

Property Crash 

It’s hard to miss a headline these days which doesn’t portray meteoric declines in property prices. Whilst it’s certainly true in some sectors that property prices have declined or at worst stood still it’s important to take stock of what’s really happening;

In January 2018 National dwelling values had risen by 43.9% over the decade.  The two big movers as you already know were Sydney and Melbourne which are well publicised. When considering growth to actual declines in value these are certainly not as dire as what we are hearing albeit we aren’t quite at the bottom depending on who you are asking.

  • Sydney 64.4%  (Fell 8.1%)
  • Melbourne 56.4% (Fell 5.8%)
  • Canberra 35.4% (Up 4.3%)
  • Brisbane 16.1% (Fell .3%)

(Source CoreLogic)

Brisbane on the other hand is perhaps proving that slow and steady creates a sustainable outcome with many analysts pointing to further growth over the next 3 years largely due to leading the nation in net interstate migration.

lendingBrisbane is a tale of two cities though or perhaps three if you now include consistency in our prestige property market (+1.5m) along with residential and apartments. It’s prudent to consider that there is still an oversupply in apartments at 11.2% below their 2010 high (SQM research). That being said with less new projects, rising interstate migration and a huge infrastructure pipeline driving people towards inner city Brisbane we should start to see signs of consistent improvement. If you are looking at this sector perhaps it’s worth considering the uniqueness of your property, quality/ spec of the property, future local infrastructure improvements and or proposed surrounding developments which may eclipse your property.

2019 Property Outlook – by sector

lendingWhere to in 2019…

Whilst there is still a lot to play out in terms of the above points and anyone within the Financials Services Sector remains holding their breath until RC recommendations are handed down on 1st Feb 2019… there are still reasons to be optimistic. Here’s what’s coming into play in the new year.

Home and business lending;

In our view we have largely arrived at the new norm when it comes to getting a loan….Phew!  In fact there is scope now for the banks to perhaps repeal some policy restrictions especially as the RISK’s surrounding loans provided on an interest only basis and to investors have sharply declined. The downside to this is it will be tough for banks to publically loosen credit criteria so in the event this can’t happen perhaps we will see reductions in interest rates and more competitive offers. In fact we have come back and seen some banks offering rates as low as 3.5% already in 2019.

  • Living expenses are also likely to be considered rationally by the banks with a number of banks beginning to consider pre vs post loan living expenses which makes sense. Other key serviceability items the banks will look upon in 2019 are debt to income ratio’s, credit card obligations and deep dives into investment strategies which with the right preparation can be easily managed.
  • CCR or comprehensive credit reporting for regulated lending will provide lenders with “positive” information from large tranches of borrowers in particular timely repayment history and conduct. In the past credit reporting by the banks has only provided for “negative” reporting which included factors such as Defaults, Missed payments and unsuccessful applications. Now applicants who are able to show positive credit behaviours (such as repaying debt on time) will have this reflected in their credit score. You will now be able to better influence your finance applications.
  • Open banking officially kicks off in July 2019 and has been in part designed to allow Fintechs to disrupt the stranglehold traditional banks have held on our information.  Open banking will allow individuals and small business alike to better share their transaction data with potential other lenders. The Open Banking environment is expected to ramp up competition and allow consumers to negotiate better deals and save money.
  • There have also been significant gains in the availability of funding for small business. Over the past 6 months we have seen growth within the FINTECH sector which when coupled with cloud-based accounting software provide access to working capital and term debt with minimal assessment, cost, security and ongoing monitoring.

Industry Opportunities

 Healthcare (GP, Specialist, Dentist etc)

Whilst the industry is in considerably changing and ever weighing up the Values vs Outcomes based arguments the banks have certainly opened their doors to medical professionals. We have listed some finance niches which will allow medical professional to buy or invest with confidence. These include;

  • 95% Home loans without mortgage insurance
  • 100% loans for Owner Occupied practices
  • Unsecured business loans up to 3x FME (future maintainable earnings)
  • Pre-approved car loans up to 150k

Built Industry (Engineers, Architects, Surveyors, Certifiers)

The built industry is seeing signs of sustainable growth albeit recent market cycles have appeared which can be described as a ‘profitless boom’, with margins as low as two or three per cent. The infrastructure pipeline in QLD alone is a staggering 39.4 billion over the next 5 years and presents significant opportunities for the industry.

There have been a number of large multi-global firms consolidating the top end of town however according to Macquarie bank 85% of built participants still have 10 or less staff and specialise in one discipline/ geography. This provides the industry with significant opportunities to either embrace new tech, other disciplines or expand their geographies in order to build value within their firm.

These businesses in particular need;

  • Funding for succession plans on unsecured basis
  • War chest or funding for possible M&A opportunities
  • Equipment finance (vehicles, specialist equipment, fit-outs)

 So what should you take from all this…?

  • Credit is tight but it’s unlikely to get tighter
  • Expect more competition for your finances
  • Don’t just read the headlines, do your research as it’s not all doom and gloom
  • Perhaps we aren’t in our lowest interest rate environments yet…? we know home loans are now as low as 3.50% and business lending on an unsecured basis can be achieved at 4.24%
  • Preparation is key to obtaining credit for business + keeping track of records via cloud-based technologies may significantly improve outcomes. For consumers create a budget and work towards your goals.

How can our lending solutions team work for you?

  • We provide carefully considered advice prior to making an application for finance turning the chances of obtaining finance from Possible to Probable
  • We access over 45 Primary, secondary and Niche lenders to source the best possible solutions to meet your needs. We have rates as low at 3.50%  

Our debt advisory service can review your current lending position to ensure you have market leading terms, rates and products. We help hold your bank accountable whether you’re a corporate, small business or individual this can work for you.

Want to know more?

If you require lending assistance, please contact Phil Ringuet our Lending Solutions Director.

An Important Message

While every effort has been made to provide valuable, useful information in this publication, this firm and any related suppliers or associated companies accept no responsibility or any form of liability from reliance upon or use of its contents.  Any suggestions should be considered carefully within your own particular circumstances, as they are intended as general information only.

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