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Borrowers increasingly using brokers

Borrowers increasingly using brokers

Australian Banking & Finance.com  Marion Williams  19 November 2013   

Australia is one of the world’s biggest users of mortgage brokers with broker-originated home loans on track to eclipse last year’s record volume.

The market share of mortgage brokers and aggregators reached a new high of 46.4 per cent of home loans written in the September quarter.

That is approaching the 50 per cent share that brokers have in the UK market and higher than their 25 per cent presence in the New Zealand market and 27 per cent share of the Canadian home loan market.

It is also above brokers’ share of the US market which has fallen from around 70 per cent before the global financial crisis to less than 40 per cent.

Brokers were responsible for $32 billion of home loans in the September quarter and by the end of November they’re expected to have written more than $100 billion for the calendar year to date. Broker volumes will likely reach $120 billion in 2013, a new record, according to the Mortgage and Finance Association of Australia (MFAA).

Phil Naylor, chief executive officer of MFAA, said the rise in market share is due to consumers increasingly recognising the value that brokers bring to home loan transactions.

MFAA has changed the accreditation of brokers to include their role as credit advisor. “They add value as credit advisors about the most appropriate finance for borrowers’ particular circumstances,” said Naylor.

He noted that the strong growth in broker volumes is despite the low credit growth.

If the growth rate is maintained, Naylor expects that MFAA’s members will provide more than 50 per cent of all home loans written in Australia over the next two years.

Taking market share from big banks

Research group comparator’s analysis of the top 17 brokers and aggregators indicated that smaller lenders are using brokers to win market share from the big banks.

Naylor said the four major banks use brokers fairly extensively but the second-tier lenders tend to use brokers even more because they don’t have big branch networks.

“Therefore the broker channel is a bigger share of their business and they are now drawing money away from the big four, “said Naylor. “That demonstrates that the broker channel is an important factor in the whole mix and facilitating good competition.”

When Bank of Queensland (BOQ) announced its results for the last financial year it partly attributed its relatively low growth in retail lending of 0.6 times system to the lack of a substantial presence in the mortgage market. Having established itself in the Western Australian broker market it is now expanding into New South Wales, and possibly into Victoria this financial year.

Macquarie, Teachers Mutual use brokers to grow

Macquarie has effectively used mortgage brokers to grow its share of the home loan market.  East & Partners said that Macquarie has made an outstanding comeback this year with property lending growth that will soon see it bracketed with larger regional banks such as BOQ and Bendigo Adelaide rather than with foreign-owned banks such as HSBC and Citi that have smaller home loan books.

Earlier this month, Teachers Mutual Bank, one of Australia’s largest mutual banks, started using brokers as a way to reach more of its target customers – the 600,000 teachers and their families.

“We see ourselves as national and through the broker networks we will be able to get to all teachers,” said the bank’s CEO Steve James.

 

Last modified onTuesday, 19 November 2013 01:30

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