Marketing is vital in rising-rate environment
Major aggregator Connective is encouraging brokers to double down on their efforts to retain clients, saying marketing activities are imperative as inflation and interest rates rise.
It comes as the double whammy of rising interest rates, coupled with rising prices, is putting increased pressure on consumers’ pockets. Among the solutions for mortgage borrowers is the opportunity to find a better deal on their home loan.
The value of external financing for owner-occupiers reached $12.7 billion in June, 24.6% higher than a year ago, ABS lending indicators show.
According to a report by My Housing Market, home lending fell sharply over June, which chief economist Dr Andrew Wilson said was the steepest monthly fall reported since COVID-19 lockdowns impacted activity in May 2020.
Wilson said he expected home lending to decline over coming months, with the prospect of higher interest rates and fragile confidence impacting home buyer activity.
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At a webinar held on July 21, Connective updated broker members on the current lending environment. Attended by over 370 brokers, the aggregator provided a triple perspective across mortgage broking, the economy and the property market.
Connective executive director Mark Haron and Connective CEO Glenn Lees (pictured above left and right) discussed the broking industry and member performance. Westpac senior economist Matthew Hassan provided an update on the economy, and CoreLogic head of research Tim Lawless shared an overview of the housing market.
While the topic of economic headwinds featured in all presentations, Haron said the increasingly complex economic environment held opportunities for brokers.
“While we can expect loan volumes to soften, it comes off the back of record figures from the last couple of years. [But] even with a dip in real estate transactions, a rising rates environment is going to trigger an increase in refinancing activity as borrowers begin to roll off two-year fixed rates in the next 12 to 18 months,” Haron said.
While communicating with clients with fixed rate loans due to roll off was important, Haron suggested brokers prepare themselves for changing environment by focusing on retention activities to help them create long-term client relationships.
Connective data showed that brokers who use a marketing program and communicate regularly with their clients generate higher loan volumes, he said.
As an example, Haron said broker members using Connective’s marketing platform had a median annual settlement of $38.9 million last year, as opposed to $14 million for brokers who didn’t engage with the platform.
“It doesn’t have to be Connective’s marketing solution, it could be any marketing tool – the bottom line is, if you’re communicating regularly with your clients, you will write more business,” Haron said.
Commenting further on the types of client retention activities that had proven successful across the market, Haron said Connective supported the use of technology as a way to add value to a business.
Marketing tools enable brokers to grow their business and increase their engagement with clients, both of which will become important in the current market, where new business may not be as easy to attain, he said.
“For brokers to get the cut through, they need to get the right information to the right clients at the right time. We’ve seen first-hand how powerful this can be. Brokers who used our marketing tools have a staggering 295% difference in median settlement volumes over 12 months, compared with those who didn’t,” Haron said.
Examples of marketing tools assisting brokers include automated emails to clients 30 days before their loan is due to expire, and use of customisable email templates and newsletters, he said.
“Brokers who use marketing tools well can build trust with their clients, strengthen their brand and reinforce their expertise – all of which helps them gain a competitive advantage,” Haron said.
Official cash rate rises over May to August are triggering a flurry of refinancing activity as borrowers look to keep their repayments under control, and Connective expects this demand to escalate, Haron said.
“As the cost-of-living increases, clients will want to lock in competitive deals quickly and easily. This is where the opportunity lies for brokers. We encourage brokers not to wait for clients to come to them but to proactively reach out,” Haron said.
Updating Connective brokers on the housing market during the webinar, CoreLogic head of research Tim Lawless said while conditions had diversified, sales activity was still above average. Putting falls into perspective, Lawless said the market was coming off record highs.
“The headwinds are outweighing the tailwinds but there’s still opportunity for brokers as borrowers will need to refinance after fixing,” Lawless said.
Commenting on inflationary pressures, Westpac senior economist Matthew Hassan said despite a multitude of factors impacting prices, consumer spending had remained strong, at 9% above pre-pandemic levels.
“The housing market is entering a significant correction phase, which we expect will stabilise late in 2023. Rising interest rates reduce borrowers’ capacity and means buyers can’t stretch to meet the market in the same way,” Hassan said.
In addition to reaching out to clients and sending timely communications, Haron suggested all brokers remain up-to-date with the latest loan offers, including the current rates that are available.
It was important that brokers draw on resources, such as a marketing platform, to help them keep in contact with clients to start those conversations, he said.