Credit tightening raises concerns over broker pipeline quality

On this week’s Finance Specialist podcast, co-hosts Liam Garman and Trent Carter unpacked how changing market conditions, reduced borrowing capacity, and tighter credit assessment standards are exposing weaknesses in how brokers forecast revenue and manage their CRM pipelines.

While proposed changes to negative gearing and investor taxation have not yet passed Parliament, Carter said brokers should already be preparing for the likelihood of reduced borrowing capacity and stricter servicing outcomes.

“It’s an unsurprising start to play with negative gearing. A lot of the lender servicing tests rely on negative gearing as part of their servicing calculation. So we start to tinker with that, then we can expect borrowing capacity to come down,” Carter said.

“But what to be warned here is that if these budget pressures come through, it won’t just tighten gradually, it effectively will happen overnight for some of these calculators.”

Both Carter and Garman noted that brokers operating heavily in the investor market may face flow-on impacts to refinancing activity, deal sizes, and pipeline conversion rates if servicing calculators are adjusted quickly by lenders.

The growing ‘pipeline illusion’

Carter described the growing disconnect between broker CRM activity and genuine fundable revenue. While brokers may think they’re growing, in reality, they may just be maintaining their existing book.

“As we’re moving into this tightening market, and as we said, there’s some real changes that are potentially coming down at us in terms of that removal of negative gearing, lower borrowing capacities, etc... there’s a gut feel out there that brokers pipelines could be overstated as much as 30–60 per cent if they’re relying on the last 12 months or more of history to just go Ctrl + C, Ctrl + V and say, ‘Oh well, that’s what I’ll do just this year,’” Carter said.

Carter said that many brokers are mistaking activity for certainty, particularly as refinance and restructure activity begins replacing transaction-driven lending.

“A full pipeline doesn’t mean it’s going to be a full year for you, it means you’re just busy today,” he said.

Carter also raised warnings over aged pipeline deals, noting that older opportunities may no longer reflect current lending conditions, client positions, or lender appetite.

“I genuinely believe if it’s older than 90 days, it’s not a pipeline, it’s hope,” Carter said.

“Rates have changed, policies have changed, the client position has potentially changed.”

Longer settlement cycles and slower conversions

Garman and Carter also discussed how brokers may begin experiencing slower settlement cycles as lenders tighten credit standards and clients require more extensive restructuring work.

Carter noted that while upfront commission volumes may remain relatively stable in the short term, some brokers may find trail growth becomes harder to achieve if much of the activity is refinance-related rather than genuine new-to-bank lending.

“You’re rewriting deals potentially that you’ve already done. So this isn’t genuine new business to the business. It’s maintenance of your pipe, of your trail book,” he said.

“You could have a year where your upfronts are okay, because you’ve done a number of transactions, but your trail book is probably harder to grow in this market because there’s less new business if you’re just relying on working with your clients.”

Preparing for FY26

Rather than relying on historical conversion rates or optimistic forecasting assumptions, Carter encouraged brokers to aggressively reassess their pipelines ahead of the new financial year.

“The first one’s a bit of a stock take. Go through your current pipeline reset, what the pipeline truth is,” he said.

“Killing your aged deals, or getting them out of your pipeline doesn’t mean you need to kill the relationship with the client, but you probably need to reset expectations in your own mind about what that deal is and where it’s going to come in.”

The pair also discussed the importance of segmenting pipelines into what’s fundable now, what deals require further work, and what are realistically just aspirational opportunities.

Only genuinely fundable deals, Carter said, should be counted toward revenue forecasting.

He added that brokers entering uncertain market conditions needed to prioritise realism and credit quality over optimism.

“I think the biggest risk to brokers, not right now, isn’t the lack of opportunity. There’s plenty of opportunity. It’s misreading it,” he said.

“Probably the ones that are going to win this year aren’t the ones with the biggest pipeline, they’re the ones with the most credit aligned pipelines.

“Hope’s not a strategy.”

[Related: Broker’s $17k billboard blitz targets CGT reforms]

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