The broking industry’s ongoing expansion and its increasing market share when it comes to home loans should come as no surprise as consumers move away from direct lenders, according to industry expert Ash Playsted and Mint Equity’s Zac Peteh.
Data recently released by research group Comparator, a CoreLogic business, and commissioned by the MFAA underscores the dominance of mortgage brokers over their direct lender counterparts.
Between January and March 2023, brokers wrote 69.6% of all new residential home loans – the highest March quarter on record, according to the research.
While the total value of home loans settled by brokers in the March 2023 quarter experienced a year-on-year decrease of 10.8%, the consistent rise in market share signifies a shift in consumer preferences towards the broker channel.
Prominent industry figure and strategic advisor with broker coaching business Broker Ideas Group Ash Playsted (pictured above left) said it was inevitable that the broking market would eventually reach 80% and beyond because what brokers did was “irreplaceable”.
“The broking industry will continue to expand and soak up more and more of the total mortgage settlement volume. So absolutely no surprise, it’s great to see and may it continue,” Playsted said.
Playsted emphasised the changing dynamics within the lending industry itself as one of the reasons for growth in the broker channel.
In the past, he said major banks viewed brokers as competitors to their proprietary channels, investing significant resources in advertising their direct lending options.
However, Playsted said a shift had occurred as lenders had “effectively accepted the role of brokers”.
“Banks are now making a conscious decision to cut back on branches and staff in branches and have accepted that people are voting with their feet and would prefer a broker to do the leg work than for them to walk into a branch and do it themselves,” said Playsted.
Zac Peteh (pictured above right), director and mortgage and finance broker at Mint Equity, agreed saying the role of mortgage brokers had undergone a significant transformation, with many evolving into trusted confidants for homeowners and becoming the primary resource for finding solutions.
“The majority of retail lenders lack the stability, organisational structure, and experience necessary to establish enduring relationships with homeowners,” Peteh said.
The introduction of BID
It is little wonder that the rise in broker market share has coincided with the introduction of best interests duty (BID).
Since BID was introduced on January 1, 2021, there has been a notable 12.1% surge in the broker share of residential home loans when comparing this year’s MFAA data to the March 2021 quarter.
Playsted said the professionalisation of the industry – highlighted by the introduction of BID – had started to flow over into the broader public perception of the broker’s role.
“Having been in the industry my whole life and met and worked with literally thousands of brokers, it is very rare to actually find a broker who doesn’t operate that way anyway,” Playsted said.
“The fact that it’s talked about and that it’s an obligation now is a good thing. It’s all about best practice and this is what I love about the broking industry and where it’s heading.”
Peteh said that having “best interests” in the title undoubtedly suggests a positive impact on the industry but he was concerned that banks and non-bank lenders were excluded from operating within the same framework.
“This issue should be addressed. Many consumers are likely unaware that mortgage brokers’ processes are linked to BID, as the obligation ultimately falls on them, albeit with additional paperwork,” Peteh said.
Peteh pointed out there were disparities between the lending process in the broker channel versus the direct channel. For instance, he said some lenders allowed their branch staff to interpret credit policies differently, and interest rate discounts could vary between the broker channel and the retail branches.
“Achieving consistency across all channels in terms of products and pricing is crucial to ensure that all consumers have a fair opportunity to secure appropriate lending solutions and interest rates,” he said.
The value proposition of brokers
While the data is encouraging, mortgage brokers may have still missed an opportunity to gain a more substantial advantage over the direct lender channel by enhancing the consumer experience.
The increase in mortgage broker market share in the March quarter was only 0.1% above the previous quarter, which Peteh said was “somewhat underwhelming”.
Peteh said the increase could not be effectively accomplished under a work-from-home model.
“At Mint Equity, our team made a deliberate choice to work from the office consistently over the past three years,” he said. “This decision has allowed us to foster knowledge-sharing, provide a rich training environment for new team members, facilitate seamless collaboration, and promptly develop solutions for our clients.”
In an age where information is readily available and consumers can easily access product prices and features online, it’s easy to assume that the value proposition of brokers is waning – yet the data suggests the opposite.
“More and more home buyers are now turning to real people to help with the process. They’re overwhelmed with the information, and they need somebody else to simplify it and take them through it,” said Playsted. “Beyond the obvious, a brokers job is to coordinate everything and help their clients sleep at night.”
