Mortgage Brokers increase competition and choice, driving lower interest rates
A Deloitte Access Economics report released 24 July, 2018 has found that mortgage brokers drive more competitive mortgage pricing, provide valuable services and greater choice for consumers.
The average mortgage broker has access to 34 different home loan lenders, and of these they use an average of 10 lenders to settle loans based on their customer’s choice, financial circumstances, needs and preferences.
Mortgage brokers drive competition in the lending market by providing access to a wide range of lenders – not just the major banks or their affiliates – helping to drive down interest rates for all Australian home buyers and investors.
The report, titled The Value of Mortgage Broking, which was commissioned by the Mortgage Broking Industry Group (MBIG), revealed that more than half of all home loans each year are originated by mortgage brokers – and this number continues to grow.
In addition, the market share of broker-originated loans for lenders who are not major banks or their affiliates has increased from 21.4 per cent to 27.9 per cent in just four years, highlighting the competition being driven by brokers.
Mortgage & Finance Association of Australia CEO, Mike Felton, said that the report provided important insight into the industry and the value it provides to everyday Australian homebuyers – particularly in helping to drive lower interest rates for all consumers, not only those who use a broker.
“The mortgage broker channel has made home loan financing cheaper for all Australians. While not only providing homebuyers with access to more residential lending options, mortgage brokers have contributed to a fall in net interest margins of more than three percentage points over the past 30 years,” Mr Felton said.
While the financial sector has been under significant scrutiny from regulators, mortgage brokers continue to be focused and dependent on building strong relationships with customers. These existing relationships, both directly and indirectly, make up 70 per cent of mortgage broker business, giving brokers a strong incentive to provide a competitive and valuable service.
Finance Brokers Association of Australia Executive Director, Peter White, said mortgage brokers were committed to providing exceptional customer service that included sound advice, lower search costs, greater competition and a diversity of choice.
“Customer satisfaction is critical for our industry. With so much referral and return business, brokers know they must do everything they can to help their customers secure finance that works for them. And, it’s clear that this is happening – more than 90 per cent of homebuyers are happy with their mortgage broker’s performance,” Mr White said.
“Beyond this dedication to serving their customers, mortgage brokers are experienced professionals. The report found the average broker has 13.8 years’ industry experience, which speaks to the quality of service and value that brokers provide their customers.”
The report also highlighted the significant value the channel provides for rural and regional Australians. With customers in rural and regional areas making up three in 10 mortgages originated by mortgage brokers, brokers provide access to a range of lenders in places where there may be few or no bank branches.
The Value of Mortgage Broking report was commissioned by MBIG to provide Australians with greater transparency into the role mortgage brokers play in the market, and the value they provide.
Below are some of the key highlights on the mortgage broker industry from the Deloitte report.
• The mortgage broker channel drives competition among lenders, which helps reduce interest rates.
• More than 90 per cent of mortgage broker customers are happy with the service they receive.
• Half of all home loans are originated by mortgage brokers, and this number continues to grow.
• Mortgage brokers are improving access to lenders that are not major banks or their affiliates.
• The four major banks account for just 50.7 per cent of broker-originated loans.
• An average mortgage broker has 13.8 years’ industry experience.
• Brokers that are sole traders earn an average income after costs and before tax of $86,417.
• The mortgage broking industry supports more than 27,000 full-time equivalent jobs.
• The mortgage broking industry contributes $2.9 billion to the Australian economy each year.
• Sixty-four per cent of brokers have education and training above their required qualifications.
The Mortgage Broking Industry Group (MBIG) comprises AFG, Astute Financial, Aussie, Choice Aggregration, Connective, FAST, Finance Brokers Association of Australia, Loan Market, Mortgage & Finance Association of Australia, Mortgage Choice, National Mortgage Brokers, PLAN Australia and Smartline.
The full Deloitte Access Economics report, The Value of Mortgage Broking, can be accessed at https://www2.deloitte.com/au/en/pages/economics/articles/value-mortgage-broking.html
by FBAA | Jul 24, 2018 | Media |