Repricing volumes expected to outpace refinancing: Sherlok

Data released by technology provider Sherlok has highlighted the various benefits of using home loan repricing strategies to help brokers reduce client churn.

The report titled Home Loan Pricing Spotlight collected findings from 36,546 processed reprices for brokers and their clients across the country from July to December 2023.

The report found that brokers leveraging Sherlok’s methods achieved an average rate reduction of 0.46 per cent over the period for brokers’ clients (utilising the Sherlok Loyalty Index metric), representing an annual interest savings of $2,070 per home loan (assuming an average loan amount of $450,000.

Furthermore, it was found that brokers utilising Sherlok’s repricing technology achieved a 32 per cent reduction in client churn compared to brokers who did not.

According to the report, this can add an additional $50,816 of revenue per annum per broker generated from retaining trail commission and generation of new upfront revenue by refinancing clients when a reprice has been unsuccessful.

Speaking to The Adviser, Sherlok’s founder and chief executive Adam Grocke said as repricing is still a relatively new concept that brokers are adopting, they “expect the growth of repricing volume to outpace refinancing”.

“What’s more, repricing can achieve the same savings outcome for the brokers’ clients as refinancing with significantly less effort. So we always encourage brokers to reprice with the existing lender before they look to refinance,” Grocke said.

“It also helps to avoid the eleventh hour retention efforts by the existing lender that can unfairly kill a refinance deal for brokers who have invested 10-plus hours in preparing and submitting the refinance application.”

Although interest rates seem to be on hold (with potential cuts on the horizon), Grocke said that Sherlok’s data backs up the Australian Competition and Consumer Commission’s (ACCC) home loan pricy inquiry and “proves the longer you're with the same lender, the higher your interest rate”.

“Therefore, regardless of interest rate movements, customers are still likely paying too much interest and will be looking to reduce their largest monthly expense, their mortgage repayments, especially as the cost-of-living pressure is felt alongside fixed-rate rollovers,” Grocke said.

Grocke added that there has also been a “shift in brokers' mindset” to home in on client retention strategies.

“A great, automated and consistent retention strategy provides brokers with a significant return on investment by protecting trail income and keeping clients happy who refer friends and family,” Grocke said.

“This is one reason why Sherlok launched a Managed Service, brokers wanted to fully outsource the whole retention strategy to Sherlok and it’s been a huge success for the brokers, their clients and Sherlok.”

Association heads Peter White of the Finance Brokers Association of Australasia (FBAA) and Anja Pannek of the Mortgage & Finance Association of Australia (MFAA) lauded the findings from the report.

“This report comes at a critical time for the mortgage broking industry. The data-driven strategies outlined provide invaluable guidance for brokers seeking to enhance client retention and drive sustainable growth,” White stated.

“The findings of this report offer valuable insights for brokers and lenders alike. By implementing the recommended strategies, industry professionals can strengthen client relationships and foster long-term success,” Pannek said.

[RELATED: Sherlok achieves data security certification]

Written by Adrian Suljanovic

Last Updated: 09 April 2024

Published: 10 April 2024