How the mortgage industry has changed over the last decade

“That wasn't a conversation that we were having [before] because the rates were the same, whether you talk of principal and interest or an interest-only loan,” he explained further.

Ross has been in the market for 15 years, and he believes that while property markets may realign in the future as it has done in the past, the disparity in interest rates is expected to remain for quite some time. The recent changes brought about by the Australian Prudential Regulation Authority (APRA) has been put to take the “perceived heat” out of the market. As a result, the property markets across Australia have started to soften and fewer investors are entering and staying in the market.

The mortgage broker said: “I've seen constant changing ebbs and flows. There was a time where there were different rates for investors and owner occupiers, and then they were exactly the same.”

“There is a chance that they will take them away when the market cools for them,” he added.

The role of mortgage brokers

Mortgage brokers are considered as important distribution tools for banks to shift their mortgages, but there has been a bit of conflict between banks and brokers recently due to percentages of loans.

According to Phil: “It's an interesting relationship. There's a thing called channel conflict between brokers and banks, where, often, banks like to have a direct relationship but they also use the broker channel as well to generate volume.”

While there is an option to go direct and negotiate with banks, most people—especially those in the business of wealth creation—feel safer following the advice of a professional who has earned experience and expertise. In fact, almost 60 per cent of loans in Australia are generated through the mortgage channel because the added layer of complexity has only driven more people to get help from mortgage brokers.

After all, property investment is never a cheap mode of creating wealth.

Ross explained: “Before, you had fixed and variable rates. Now, we've got fixed interest-only, fixed principal and interest, variable interest-only, variable principal and interest, investment interest-only—there's so many variables.”

“A rate is no longer a rate, and a product is no longer a product the way that the loans are assessed.

“There's so much more complexity and the added layer of complexities is just going to drive more and more people to mortgage brokers,” he added.

The mortgage industry’s growth

As much as the property investment landscape has changed, the mortgage industry has also experienced unprecedented growth over the last decade. For instance, the National Consumer Credit Protection (NCCP) Act has been enacted in 2009, which required brokers to be licensed and operate within a certain guideline.

According to Phil: “For a period of time when it was a fledgling, [a] new industry, there were some rogue operators out there that probably weren't behaving in the best way.”

“The mortgage industry today, the third party mortgage industry … [is] a professional operation outfit now and adding considerable value to consumers,” he added.

Moreover, a lot of people in the field of property investment—from banks and brokers to aggregators—have been talking about the digital channel, where people looking to secure finance can do it via specialised websites and artificial intelligence.

But while technology is definitely going to improve the ways through which professionals offer financial services, a lot of buyers and investors still want to be involved in the process as much as they could. In the ever-changing property investment landscape and the growing mortgage industry, “personal connectivity” remains a vital part of the process for most people.

Phil said: “A lot of the heavy lifting might be able to get done by machines, but into the future … [a personal] relationship is still key.”

“At the end of the day, for most people, it's not a $20 book—it's a $500,000 … [to a] $1 million-purchase [and] they want the confidence of an expert guiding them [because], sometimes, too much information creates confusion,” Ross said.

“Tech's going to do a lot of [stuff], but the need to be able to be a good advisor is going to take so much more time, and that's where the value lies moving forward,” Phil concluded.

Tune in to Ross Le Quesnes’ episode on The Smart Property Investment Show to know more about the habits he sees among the best investors in today’s market as well as how growth in the investment industry has been enhanced by the mortgage industry in the last few years.