The Australian Mortgage Broker Survey 2007: Market Review

Content

• Overview
• Catalyst
• Summary
• Executive Summary
• The broker channel has evolved into an integral part of the Australian mortgage market
• Mortgage brokers offer a full range of products
• Given the increased importance of mortgage brokers, lenders compete for their business
• Regulation, channel conflict and commission cuts threaten mortgage brokers
• Brokers are relatively unconcerned about upcoming regulation
• Brokers regard competition from the direct channel as a major threat
• Increased competition has led to downward pressure on commissions
• There are opportunities for the mortgage broker channel to grow
• Many mortgage brokers plan to expand into other products
• Mortgage brokers must continue to leverage customers' desire for personal service
• The broker channel is expected to consolidate
• The broker channel is expected to originate half of all new residential loans in three years
• Market Context
• The broker channel has evolved into an integral part of the Australian mortgage market
• Mortgage brokers now originate around 40% of new residential loans in the Australian market
• Major banks have come to rely increasingly on mortgage brokers
• Smaller banks use mortgage brokers to an even larger extent than major banks
• Mortgage brokers continue to be crucial to non-bank lenders
• New participants have changed the composition of the mortgage broker market
• There has been an influx of new younger entrants
• Broker groups have come to dominate the mortgage broker market
• Mortgage brokers now offer a full range of products
• Mortgage brokers often provide non-standard mortgages
• Most brokers focus on conventional mortgages
• The average broker originated loan size is over A$300,000 dollars
• Refinancing is still an important part of mortgage broker business
• Brokers surveyed believe that refinancing will stay at similar levels next year
• Given the increased importance of mortgage brokers, lenders compete for their business
• Cba Has Gained The Top Spot as The Most Commonly Used Lender
• of the non-bank lenders, the most commonly used lender was RAMS
• Issues Facing the Broker Channel
• Expanded regulation of the mortgage broker industry now seems inevitable
• Asic Commissioned A Report Recommending Regulatory Reform over Four Years Ago
• Recent increases in housing stress and repossessions have led to renewed calls for federal legislation
• Brokers are confident that regulation will not affect their business
• Brokers regard competition from the direct channel as a major threat
• Brokers are worried lenders may look to pull away from broker distribution
• Australian banks have strengthened their branch network
• Increased competition has led to downward pressure on commissions
• 84% of brokers highlight decreasing commissions as a prime concern
• 24% of brokers expect commissions to decrease in the next 12 months
• Brokers are unsure of what would constitute a reasonable one-off fee
• Future Focus
• Mortgage brokers do recognize the need to adapt to a dynamic mortgage market
• Increasing product complexity will provide opportunities for mortgage brokers
• 47% of brokers envision expanding into other financial products besides mortgages
• Mortgage brokers must continue to leverage customers' desire for personal service
• The broker channel is expected to consolidate and grow
• Further consolidation is expected in the industry as it matures
• The broker channel is expected to originate half of all new residential loans in three years
• Appendix
  • Supplementary data
  • Definitions
  • Bank
  • Broker
  • Clawback
  • Lending commitments
  • Low-documentation loan
  • Mortgage package
  • Non-bank lender
  • Non-conforming loan
  • Refinancing
  • Trail commission
  • Methodology
  • Further reading
  • Ask the analyst
  • Datamonitor consulting
  • Disclaimer
• List of Tables
  • Table 1: Annual loan settlements in the financial year for major aggregator groups, 2006-7
  • Table 2: Average loan size mediated by mortgage brokers, 2006-07
  • Table 3: Refinancing lending commitments and proportion of total owner-occupier lending commitments, 1992-2006
  • Table 4: Refinancing proportion of mortgage brokers' business in the last year, 2006-07
  • Table 5: Expected change in refinancing in current year, 2006-07
  • Table 6: Brokers choice of main three lenders, 2006-07
  • Table 7: Business expectations of current year compared to last year, 2006-07
  • Table 8: Proportion of brokers concerned with issues, 2007
  • Table 9: Proportion of brokers considering expanding product line, 2007
  • Table 10: Forecasted residential mortgage lending commitments, 1992-2011
• List of Figures
  • Figure 1: Only 17% of brokers are concerned about the prospect of increased regulatory scrutiny, 2007
  • Figure 2: PLAN and AFG have annual loan settlements in excess of A$20 billion each, 2006-7
  • Figure 3: The average loan size for brokers is over A$300,000, 2006-07
  • Figure 4: Refinancing has become more important over the last 10 years
  • Figure 5: Refinancing as a proportion of mortgage brokers' business has declined slightly but remains significant, 2006-07
  • Figure 6: Most brokers think that refinancing will stay at current levels, 2006-07
  • Figure 7: CBA has become the most commonly used lender by brokers, 2007
  • Figure 8: Only 17% of brokers are concerned about the prospect of increased regulatory scrutiny, 2007
  • Figure 9: Most brokers expect their business to improve this year compared to last, 2006-07
  • Figure 10: Many brokers are considering expanding into life insurance products, 2007
  • Figure 11: Residential mortgage lending commitments are forecasted to increase to A$316 billion by 2011