Boothy Bites Episode 14 - Come See your Broker Right Now | Predictions on RBA Rates

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00:00:00:00 - 00:00:06:31
[Jackie] Hi everyone, and welcome to Boothy’s Bites, the monthly update with the man himself, Mr. Chris Booth. How are you today?

00:00:06:32 - 00:00:14:12
[Chris] Good, Jackie. Good. Really good. It's a bit of a wet and miserable May a bit of a mouthful trying to get it out.

00:00:14:16 - 00:00:17:22
[Jackie] You have to come out to Queensland. It's beautiful here. Sunny.

00:00:17:27 - 00:00:20:08
[Chris] Okay. That's an invite. Okay. I'm coming.

00:00:20:13 - 00:00:25:34
[Jackie] Everyone come up to Queensland. No, don't. Don't. You know, property prices, don’t.

00:00:25:39 - 00:00:30:46
[Jackie] Well anyway, let's get straight into it. So I'd love to hear the latest news from the RBA.

00:00:30:46 - 00:00:47:55
[Chris] Okay, cool. Well, it's been one of those funny months really. And for me, I'm all about I don't like the media. I think now they just did it to sort of sell a newspaper, which I'm sure that's what they've got to do. Right. So I think what we've actually had is this sort of situation whereby that having a chance at a headline is big news, right?

00:00:48:00 - 00:01:06:27
[Chris] And the inflation data came through for the first quarter this year, and it was a bit of a blip. Yeah. So we've got extra cost associated with fuel. Some services I think schools have gone up. I mean everyone's feeling the pinch. So the trend of inflation sort of coming down in line with the RBA's plans was it was a bit sort of off in that report.

00:01:06:27 - 00:01:21:57
[Chris] So a lot of economists are coming out now. Go. No, no way, no way interest rates are going to go up. Well, you know, it was good to hear Michelle talk about, you know, her thoughts around it. I thought she was really sort of strong and firm and fair and saying look you know long term the trend is still going in the right direction.

00:01:22:08 - 00:01:37:13
[Chris] And we feel that is where inflation is going. You know, it's going to go back to, to the, the norm over the next one a year and a half. But there's still lots of work to be done, which is you know, I think that's that's a fair reflection. So you know, the good thing for me is, is that, you know, she was pretty, pretty strong in her message.

00:01:37:13 - 00:01:53:40
[Chris] It's still business as usual, you know, don't think we're going to see an interest rate increase or decrease very shortly. She wants to see that inflation it's still the same message. And what that means really for me is that the the biggest or most important piece of data we're seeing in the next few months is going to be the next quarter.

00:01:53:40 - 00:02:09:21
[Chris] CPI, which is in there. I think the data comes out at the end of July. So that ties in really with the August decision. And I think that will be, you know, a real pivotal sort of point for the RBA giving direction to markets about, you know, interest rates going up, down or sideways for the next period. So it was a good one.

00:02:09:21 - 00:02:14:30
[Chris] So that's my forecast. No change this month, no change next month. And then a big meeting in August.

00:02:14:34 - 00:02:19:39
[Jackie] And what about your predictions for the handing down of the budget on the 14th of May?

00:02:19:48 - 00:02:35:34
[Chris] Yeah it was Albanese government been quite open about, you know, trying to commit to the tax cuts which they made when they came into sort of power and beyond. So, you know, it seems as though those tax cuts are going to come into effect, which is going to give some cash back to, you know, mums and dads, borrowers and which is a good thing.

00:02:35:34 - 00:02:50:11
[Chris] Right? It's always interesting when you've got, you know, this give back of cash, which is, you know, the fiscal policy or the, you know, the budget, which is kind of it's a bit of a bit of friction against the monetary policy because they're trying to stop people spending and creating inflation, but the government giving a bit of money back.

00:02:50:11 - 00:03:05:11
[Chris] So we're kind of not working together as well as they could, which is cool to be honest. I think the budget will be quite. I think it will let you know headlines for sure. These tax cuts are already expected and sort of locked in for July, but the tax cuts aren't massive, so it's really not going to inject a whole heap of money into the system.

00:03:05:11 - 00:03:11:49
[Chris] So again you know we've got some headlines around the budget. Yeah we're going to expect some cuts. But I think it would just be a little bit less noisy post you know.

00:03:11:58 - 00:03:15:41
[Jackie] Yeah. Yeah. Nice. And so what are the banks up to with their interest rates?

00:03:15:50 - 00:03:33:41
[Chris] Well that's the interesting one right. So that's more fun. So these dirty banks, all they're talking about these days is giving money back to shareholders. Okay. Now for me, when I was a young boy, you know, banks were there to offer a social service and a value to the, you know, their deposit holders and their borrowers, you know.

00:03:33:41 - 00:03:56:49
[Chris] Right. And they've lost that connect with, I think, the social side of things. Secondly mortgage brokers naughty naughty because we're giving so much good service to our clients. More clients are using a mortgage broker than ever before. I think we said last month it was over 70%, which is really cool. And what the banks are saying is, hey, hey brokers, if you guys want to use brokers, well, that's taking money from, you know, us making $20 billion worth of profit this year as a bank.

00:03:56:51 - 00:04:13:35
[Chris] That's not fair. Well, what I say to the banks is if they get their act together, stop providing better advice, have a bit more of a social conscience, and more clients will come and engage them directly, rather than coming through a trusted partnership with a broker. So they're complaining about their net interest margin in their profits, which I think is great.

00:04:13:35 - 00:04:28:55
[Chris] So but the good thing about their profits, they're going down. More money is being spent paying the brokers for the great work that they do for their clients. So the engagement with the broker is way better. So, you know, firstly, I just want to thank the banks for supporting the broker business and paying us the money that we deserve.

00:04:29:00 - 00:04:47:24
[Chris] And secondly, thanks for the clients for supporting the mortgage brokers. And yeah, using our advice and services. So yeah, bit of a naughty one for the banks. What that means for interest rates though is the banks are trying to claw back a little bit of the interest costs associated with some of these loans. So they're attracting new to bank money with cheap discounted rates.

00:04:47:29 - 00:04:58:59
[Chris] But then once you're in the system they sort of increase those interest rates slightly to claw back a bit of margin. So yeah. So watch those games. So what I would say is don't trust the banks. Come see your broker.

00:04:59:04 - 00:05:09:04
[Jackie] Yeah. We could make that into a song.

00:05:09:09 - 00:05:13:35
[Chris] And so do you want any favorite lenders at the moment for borrowers we've got.

00:05:13:35 - 00:05:33:28
[Chris] Yeah. So really nicely this week we've been introduced to Bendigo Bank. So Bendigo Bank they've had Adelaide Bank for many many years. And from a broker perspective we've been sort of limited to the Adelaide Bank platform and lending, which has not been bad. Right. But certainly it's now great to have Bendigo Bank as a sort of a national business on our panel, and they've got some really good rates.

00:05:33:28 - 00:05:53:36
[Chris] They've got a really strong community banking service, well supported with branch networks, good technology and infrastructure, and their interest rates are extremely competitive and their products are fantastic as well. So we met with the lady corporates the day she's launched the Bendigo service and Bank bank to us, which is which is really exciting. That's good for our clients as well.

00:05:53:36 - 00:06:10:35
[Chris] And we've already got some applications for clients going there who were looking to save some money. I think, you know, right now the every client that we're speaking to is really conscious about the interest rate, because obviously that dictates, you know, the cost of the loan product. Now if you're a strong borrower. I mean, like got good income and a low loan to value ratio.

00:06:10:35 - 00:06:27:43
[Chris] So your loan, you know, let's say it's $1 million and you've got like $500,000 loan against $1 million home. That's 50% loan to value ratio. That's a low risk for the banks. So they're being attracted by extremely low interest rates. And we're seeing that, you know, with many of the lenders now having this tiered pricing system to discount those rates.

00:06:27:48 - 00:06:51:14
[Chris] So there's a massive promotion on, you know, trying to check these good quality clients to to banks. But not everyone sort of meets and hits those benchmarks and hurdles to get into those lenders. So a bit of education from us is, is around the change of the credit policies that the banks are using to assess loans. So, you know, from a borrower perspective, you know, when we first talk, we're always talking about, you know, best rates.

00:06:51:28 - 00:07:06:45
[Chris] But then what we're doing then is overlaying, you know, what the most appropriate lender is in terms of their personal situation, which takes a little bit more conversation. So sometimes you don't get the best rate. But we're going to try find the best rate for you with the most appropriate lender. I think that's sort of what we're working with right now.

00:07:06:59 - 00:07:32:31
[Chris] And in fact, in my mortgage broking history, I don't think we've ever had to reach out to so many different lenders to provide these solutions for clients as we do today. You know, we have a panel of over 60 residential lenders. In the old days, we probably stick with, you know, maybe you top five. But right now, you know, I know our operations team are probably working with you know, 20 or 30 different lenders at any one time, which is, you know, a lot of paperwork, a lot of different systems and a lot of different ways to do things.

00:07:32:31 - 00:07:34:17
[Chris] So, yeah, it's pretty interesting right now.

00:07:34:17 - 00:07:43:59
[Jackie] Yeah, yeah. Shout out to our ops team. They're amazing. Exactly. And lastly, what are some trends you're seeing at the moment with refinancing and first home buyers.

00:07:44:04 - 00:08:08:07
[Chris] So there's two things I think again you know going back to that cost of living and things. We're doing a lot of work around cash flow budgeting. So especially interest only maturities and fixed rate maturities. So we've still got lots of clients coming off those 2% interest rates from 2 or 3 years ago, which is, you know, trying to have those conversations with clients where their interest rates now are over 4% more than they were before, and then resetting that budget again, that's a real challenge.

00:08:08:07 - 00:08:27:55
[Chris] So that's a bit of work we're doing. The second part is working with investors to make sure that their interest only repayments are being made in line with, you know, that negative gearing benefits. So they get to sort of manage cash flow better. And that's an interesting one because a lot of clients, when they're actually applying for these interest only extensions, they may not sort of qualify back with their original lender.

00:08:27:55 - 00:08:49:28
[Chris] So again, we're looking to work with their original lender to re extend interest only. But often because interest rates have changed so significantly, we might have to look at alternative lenders who are more supportive of investors than the existing lenders. So that's you know, again it's an education process and things. And then lastly we have a massive amount of young people and young families trying to buy their first home.

00:08:49:28 - 00:09:08:24
[Chris] I mean, our pre-approval legit is is huge. And again, I'm not not seeing this in a long, long time. And that pent up demand is really, you know, first home buyers and upside first home buyers. Crazily. It's like, you know, 40 year old young families as well. You know, that first home buyers looking to buy their, you know, one $1.5 million, $2 million property, well, they're still first time buyers.

00:09:08:34 - 00:09:26:26
[Chris] It just happens to be they're buying at 40 and it's a $2 million property. Right. Which is pretty crazy. But nonetheless it's a really tough market for those clients. So the conversations we're having a twofold number one, you know, what is your affordability and borrowing capacity. And also what are the lenders doing with regards, you know affordability as well.

00:09:26:31 - 00:09:47:42
[Chris] And yeah that means some clients are just, you know, really want to borrow the maximum that they can. And it just means that we're no longer working with like you know, the main bankers because there's more flexibility with some of these second lenders. You've got more favorable terms to borrow. Like and I'm talking about clients now who have bonuses, commissions, overtimes, all of that sort of alternate income outside of base income as well.

00:09:47:42 - 00:10:07:07
[Chris] So so again, you know, we're doing a lot of work with these first home borrowers educating, talking about, you know, their borrowing capacity, obviously always looking for best rates. But it is a real hot property market right now in that sort of 1 to $1.5 million price point. And also, you know, we start to see people coming back into the market from an investment perspective now.

00:10:07:12 - 00:10:13:57
[Chris] And their price point is in that sort of high sort of, you know, up to $1 million, you know. So again, that space is pretty crazy.

00:10:14:02 - 00:10:16:40
[Chris] Yeah. My gosh, I have to wait and see what happens.

00:10:16:40 - 00:10:21:06
[Chris] Yeah, I think so. Yeah. But yeah. So working with your first home buyers, which is, which is been fun.

00:10:21:10 - 00:10:29:31
[Jackie] Yeah. Well that is everything I have for these guys on this. Ruby has anything else to add himself?

00:10:29:36 - 00:10:42:59
[Chris] I just want to have a big shout out. And you just mentioned it before, Jackie. You know I'm broke when we've got some wonderful mortgage, right? Because there's no doubt about it. And they the ones that get the accolades, you know, the Google reviews and the shout outs and things like that, which is really cool because they deserve it.

00:10:42:59 - 00:11:00:00
[Chris] Right? Often the people that are called out in our business is our operations team, and we've got a wonderful team. It's a growing team. They're based over in the Philippines, powered up by our business partners virtual, also a vital business partners. They've just changed their name too. So for me a big shout out today has to go to the operations team.

00:11:00:00 - 00:11:21:24
[Chris] They're working so hard. Like I said before they have to know all of these credit policies, paper processes, procedures, pricing forms for our clients to, you know, launch these applications. And they do a lot of work for the brokers. So the Friday shout out and through these bites, my addition goes to the powerhouse that's leading operations and our marketing team as well, whom.

00:11:21:28 - 00:11:23:10
[Jackie] We go, team!

00:11:23:15 - 00:11:26:55
[Chris] Over and out. There you go. Drop the mic.

00:11:27:00 - 00:11:31:16
[Jackie] Well Boothy, thank you so much for your time, your knowledge, your expertise. And we'll see you next.

00:11:31:28 - 00:11:43:00
[Chris] Jackie, just before we go, but do you have a finance song we can share? I think it would it would add value to business, but if you could do it, do you.

00:11:43:04 - 00:11:45:01
[Jackie] Do you really want me to sing it?

00:11:45:15 - 00:11:47:51
[Chris] They will. It will pick up my followers.

00:11:47:56 - 00:12:05:48
[Jackie] Okay, okay. I just need to give a bit of a backstory, though I did not create this song. It has gone viral on TikTok, and I posted on my Instagram that it's been stuck in my head for the past week, so I'm going to sing it for you all.

00:12:15:49 - 00:12:17:58
[Chris] See you, Jackie!

00:12:18:03 - 00:12:24:53
[Jackie] Thanks, Boothy! Bye.