BONUS EPISODE: Where To Next For House Prices?

How We Got Here with Chris Kohler

In this bonus episode, host Chris Kohler conducts a randomized interview with Mortgage Choice CEO Anthony Waldron to navigate the complexities of the

Key takeaways

• Over 81% of all mortgages in Australia are now written by mortgage brokers.
• At its peak, Australian borrowers were paying an estimated $11 billion annually in 'loyalty tax'.

Main topics

• Interest rate fluctuations
• Mortgage broker industry growth

Notable quotes

The national number really masks local markets.

Conclusion

While the current economic climate presents significant challenges for

Transcript preview

Speaker 2 (0:00) Hello and welcome to How We Got Here. This is a bonus episode where you actually get to hear from somebody with actual insight and advice that can be helpful. So I'm looking forward to that. Anthony Waldron is the CEO of Mortgage Choice. Anthony, thank you very much for joining us here on How We Got Here. Pleasure to have you. Thanks for having me. How long have you been working in the property and financial services space? Speaker 1 (0:23) Well, too long. Over 30 years now. Speaker 2 (0:26) I've Speaker 1 (0:26) been involved in the industry in different ways. So it's seen certain lots of changes and I've certainly been around lots over those years. Speaker 2 (0:34) Of course, you're the CEO of Mortgage Choice now, which means you have a good bird's eye view of the whole situation and having that experience. I mean, safe to say this is a bit of a challenging time in Australia's property markets. But I mean, how does it sort of sit in your mind? Do you rank this with, you know, COVID, with perhaps the GFC or? How does it sort of feel Speaker 1 (0:55) to you? Well, I think it's because there's multiple things happening at once. So we've got interest rate movements, which we've seen lots and lots of times. That's been part of it. I think the other aspect of it, though, is that the budget changes and the changes in negative gearing and the changes in capital gains tax, they're generational changes. And so really when you start to look at that together and the impact of that happening at once, I think that's why it feels so big. There's lots to learn from the past as well because we have seen change in the past. Speaker 2 (1:22) Yeah, well, it's interesting to hear you talking about those kind of those individual issues being stacked on top of each other. And I'm really eager to kind of get into some of those with you and get you to sort of lay it out on the table in front of us if that sort of plays. And one of the ways that I wanted to do this is have it as a bit of a randomized chat. Yeah. Speaker 1 (1:42) I Speaker 2 (1:42) wanted to get you, Anthony, to pull keywords out of a bowl or in this case a mug. Speaker 1 (1:47) Yep. Speaker 2 (1:48) And then I'm going to ask you a couple of questions about that. So neither of us are going to know where it's going. Speaker 1 (1:52) Okay. Speaker 2 (1:53) But I'm confident that it's going to work. I've actually never done this before. Speaker 1 (1:56) Right. Either of us. I've done some interviews Speaker 2 (1:58) before like this. I've never done it randomized. So we'll find out together if it works. Speaker 1 (2:02) Okay. But Speaker 2 (2:02) the other thing that we do on How We Got Here is something called Two Truths and a Lie, which we have a bit of fun with. We lay out three facts. The audience gets to decide at the start what they think the lie is and then see if they've changed their mind by the end. And I'm really glad that you said Speaker 1 (2:17) that you'd play ball and present your own three. Yeah. Speaker 2 (2:21) Would you mind? Speaker 1 (2:22) Yeah, I get to try you out on this. Yeah, I'm going to have a crack Speaker 2 (2:25) here. I Speaker 1 (2:26) don't know if I back myself entirely, but I'll weigh in. I think we'll see how you go. Okay. So first up, at its peak, Australian borrowers were paying an additional $11 billion a year in loyalty tax. Okay. Speaker 1 (2:42) $11 billion, that's a specific number. I know that Speaker 2 (2:44) loyalty tax is a big issue. I'm going to ask you about that. Okay. Fair Speaker 1 (2:47) enough. Registered. The second one. Yep. Over 81 % of all mortgages in Australia are now written by mortgage brokers. Seems like a lot. Yeah. Okay. Yep. Registered. Registered. And the third one. Yep. We've seen more first home buyers enter the market since the May budget. Speaker 2 (3:08) Okay, that would surprise me if that one was true because the May budget felt like a bit of a bomb for some parts of the market. Speaker 2 (3:18) First two seem plausible. I just don't know about the number. The third one, I feel like that's hard to believe. I will go on record as saying I think it's the third one and then you can tell me at the end whether or not that's right. Speaker 1 (3:29) Okay. We'll wait till the end. Speaker 2 (3:30) You're not giving anything away, right? No, no. That's Speaker 1 (3:32) okay. This Speaker 2 (3:32) is big. Well, we're going to get into the kind of the breaking down. Here's the thing. I want to go through things like the federal budget, which you just spoke about. Things like interest rates you also spoke about is incredibly important right now. given we're in the thick of it on that front. I want to get some specific advice. I want to get your perspective on prices and Speaker 1 (3:51) the Speaker 2 (3:51) outlook. I mean, I'm just sort of rattling off my wish list here. But I want to get into all of that and I want to do it in a randomized way. So if you stick through the next little break, we're going to have a break. I'm going to get you dipping into that bowl next to you. Great. So we'll get into it in a sec. Speaker 1 (4:07) Okay, great. Speaker 2 (4:09) When was the last time you looked at your home loan? Well, most of us check it about as often as we flip the mattress, and your lender's quietly loving that. If it's been a while, Mortgage Choice could help you find a better deal. Firstly, Mortgage Choice gives you more choice, comparing loan options from over 35 lenders. And with more than 1,000 local brokers Australia-wide, expert help is never far away. To get more from your home loan, choose Mortgage Choice. Talk to your local Mortgage Choice broker today. Speaker 2 (4:42) Welcome back to How We Got Here. I'm with Anthony Waldron, CEO of Mortgage Choice. Anthony, we're going to get into this, you know, randomized conversation. Okay. If it's all right with you. Yeah, Speaker 1 (4:54) totally. Speaker 2 (4:54) So we've got five or possibly six, I'm not sure. But if you could dip into that mug next to you, then we'll know what we're doing. Now, I'm going to have to keep on my toes here. If Speaker 1 (5:04) I don't like it, can I put it back? No, you cannot. Okay. All right. Speaker 2 (5:07) This is hard. Loyalty. Loyalty. Ding, ding, ding. Okay. Well, this is interesting. This is possibly going to knock down one of our two truths and a lie that you just laid out. Speaker 1 (5:18) Yeah. Speaker 2 (5:20) So obviously you sit atop mortgage choice. You deal in vanquishing loyalty, I would have thought, I think. Tell us about what is loyalty in the banking business when it comes to a mortgage? How much does it cost? How much of a problem is it? Speaker 1 (5:39) I think the whole thing has arisen out of what's been known as loyalty tax. And the reality of that is it's when an existing customer ends up paying more than a new customer. And that's all done because it's the attraction of the new customer in. But essentially, because you're an existing customer, a loyal customer, you've ended up paying more. And that has been an ongoing issue for some time. It actually got talked about quite a bit in the Hayne Royal Commission. And whilst it started to reduce over time and it has reduced over the last few years, it's an issue for customers because they look at it and go, well, why am I paying more? How is that fair? It's also changed quite a bit over the last few years. There's been some lenders come into the market who said, well, this doesn't make sense. I'm going to guarantee on some of our products that you won't pay any more if you're an existing customer than a new one. Groups like Athena came in and did that probably five or six years ago. It's changed the market, but it still exists and customers need to be really, really understanding that it still exists, especially as interest rates change. That's the time that it gets worse. Speaker 2 (6:42) So safe to say that if you're driving down the road and you see a billboard with a rate on it from a big bank, then what you're seeing is the attractive front door, front book, as it's described, and then the longer you stay on, the further into the bank you drift. Is that kind of basically what happens? Speaker 1 (7:01) Yeah, that's right. So it's this front book versus back book relationship that you have there. And, you know, it's the customer who's been loyal who's historically ended up paying more. Speaker 2 (7:10) I once did a video on this on social media. I said basically that loyalty tax is a huge thing. You have to check in with a mortgage broker who will help you get a better deal. And, you know, you don't have to pay the mortgage broker up front. And I got this huge pile on. from American viewers being like, this is absolute crap. He's lying. This isn't how it works at all. Because it's not how it works overseas, right? Like this is Australians lean on variable mortgages kind of more than overseas. Speaker 1 (7:40) Is Speaker 2 (7:40) that right? Yeah, that's Speaker 1 (7:41) right. That's completely right. If you go to America, it's almost all a fixed rate environment. Whereas if you come to Australia, it's almost all a variable rate environment. We've actually got quite a different market to most other countries. Speaker 2 (7:51) Do you find that sort of shift? between variable and fixed or at least the conversation happening a lot, Speaker 1 (7:57) possibly more than it used to? It happened a lot about five or six years ago as interest rates were coming down. And what you saw then was the curve, the interest rate curve. The future rates were expected still to get lower. And so fixed rates were then lower. People locked in rates. Remember when people were locking in rates at sub 2 % for their mortgage? Hopefully you were one of them. It would have been nice. No. It wasn't you? No. Okay. But most people started to lock that rate in. And it was a smart thing to do at the time. And then as they came back out of that, they went back into a variable rate environment. It was called that fixed rate cliff. The cliff. Do you remember that? Speaker 2 (8:33) Yeah. We were talking a lot about the cliff. And to be honest with you, Anthony, I thought. And I reported on the cliff like it was going to be some sort of Armageddon moment and it just didn't really happen. And I've been talking to bank executives just going like, so what are we just people are hanging on? Like people are kind of muscling and gritting their teeth here as the kind of the shift in their payments Speaker 1 (8:52) changes so much. Yeah. Remember when people do get assessed for a mortgage, they're not just assessed at the rate they're paying. They're assessed at a higher rate. So most people had some buffer that was there. It was also coming out the back of COVID that a lot of that happened. There was a lot of cash buildup. People had put money into either their own savings accounts or they'd use their offset accounts. So there was a little bit of a buffer that people had to play with through that time. So it was a big issue for people, but it wasn't the cliff, if you like, that everyone had made out it was going to be. Everyone got through Speaker 2 (9:22) it, as we tend to do. I was going a bit hard. You were going a bit hard. I Speaker 1 (9:26) was Speaker 2 (9:26) going too hard. Speaker 1 (9:26) Yeah, it was all Speaker 2 (9:27) the journalists. We're all silly. Before we move on from loyalty, I just want to ask you, when we talk about comparing, You know, how many, because how many lenders do we have in Australia and how many should you, what's a good comparison, you know, Speaker 1 (9:39) you? Oh, well, look, when you get to all the lenders in Australia, there's probably hundreds. But the reality of it is there's 40 or 50 who are really playing in the mortgage market most of the time. I know for our brokers in Mortgage Choice, they've got about 40 lenders that they have to choose from. But then they've got about two and a half thousand products from those lenders that they have as well. So there's a lot. that they're actually wading their way through when they're looking for the best deal. Speaker 2 (10:05) A lot of products and a lot of government sort of incentives and things like that, which I think we should kind of possibly cover in a different part of this because it's its own thing, right? It is, yeah. Okay, well, I feel like loyalty is pretty well covered. I don't know. How many billions of dollars did you say in the two truths and a Speaker 1 (10:22) lie? I said at its peak it was $11 billion a year. With a B? Yeah, with a B. Okay. All Speaker 2 (10:28) right, yeah. I'm still sticking with my third one. All right. Would you mind pulling out another one for Speaker 1 (10:34) us? Speaker 2 (10:35) Advice. Oh, Speaker 1 (10:36) geez. Well, Speaker 2 (10:37) I had kind of been quietly hoping that this was going to come out