The heads of several leading banks, aggregators and industry consultants have said that mortgage brokers, rather than banks, “are the most influential information source for consumers on mortgage products”.
The Deloitte Australian Mortgage Report 2017, asked several industry leaders — including representatives from AFG, Bank of Queensland, Commonwealth Bank, eChoice, Homeloans, NAB, Pepper Money, and Suncorp — their thoughts on the mortgage market in 2016 and what they expected the home lending environment to look for in the year ahead.
The report, released on Thursday, touched on housing affordability and availability, mortgage pricing, regulation, digital disruption and innovation, and the broker market, among other areas.
Notably, when asked: “What are the most influential information sources for consumers on mortgage products?”, 60 per cent of the 10 industry leaders said that mortgage brokers were the most influential – while, interestingly, none of the respondents (including those from the banks) said that they thought “traditional banks” were.
When asked at a roundtable discussion of the report to further clarify their responses, Peter Andronicos, CEO and managing director of eChoice, said that brokers are more readily-available to access the early leads for those looking for a mortgage.
He said: “Again that comes down to the point of engagement with the consumer and the information source. The initial engagement point for the average consumer looking for a property or information to purchase, is either with a real estate agent, through searching property sites like Domain.com.au, Realestate.com.au or through Google. The mortgage broker can then pay $25–$30 for every click; or between $3–$5 on property‑related web sites or apps.
“What are the most influential information sources for consumers on mortgage products? A bank or a major financial service provider has a limited budget and broad approach. But for a local mortgage broker who only looks after three postcodes, and is after two to three leads per week, they can buy the post code out and compete with a big brand. As a company, they can buy 10 clicks a day. One conversion from the 10 clicks should deliver a very cost-effective return on investment; and the consumer can see the local location and engage with a local service provider. So, the competition is there.”
Scott McWilliam, chief executive officer at Homeloans Ltd, agreed, stating: “What is interesting is that traditional banks or lenders know they can’t just be product providers. They also need to be seen as providers of information. Lenders need to connect earlier than the point where the consumer actually decides who to go with.”
'Brokers are the ones with a finger on the pulse'
Speaking at the briefing yesterday, Deloitte consulting partner James Hickey, clarified that the question referred to where borrowers are “first getting information about mortgages, the process, how [they] should approach it” rather than which channel they choose to engage.
According to the Deloitte partner, the company was “surprised” that of the group surveyed (a “very selective group of 10 people – heads of lending and broker groups”) not one said that “traditional banks” were the most influential information source.
He said: “The first stage at getting information about mortgages and their process, right at the very front-end of the process — who are people most likely to turn to?… Most people don't think straight away 'I'll go and talk to my bank' — they think: 'First of all I'll speak to a broker or family and friends to get their experience and their input'."
Noting that "the vast majority" of the panel said consumers go to a mortgage broker is "great in terms of the profile that brokers therefore have around being able to help customers not only through the journey [of a home loan] but the very early information stages".
Mr Hickey added that it “certainly helps” that there is no upfront cost for consumers to engage a broker, so that information and assistance can be given from the outset.”
Writing in the report, Mr Hickey went on to say that the results “probably indicate that with all the changes to pricing, their differentials and impact, and the fact that products are changing all the time, brokers are the ones with a finger on the pulse across the whole marketplace of current offers”.
After mortgage brokers, 30 per cent of the panel said that “family and friends” were the most influential source of information.
Mario Rehayem, managing director for Australian mortgages and personal loans at Pepper, commented: “It will also be interesting to see how the family and friends’ role has evolved over time. Now they may well be deemed more as a referrer, than a person that is going to give them financial advice.”
Malcolm Watkins, executive director at aggregation company AFG, added: “When it comes to the introduction point, you would have a different answer for a 25‑year‑old. However, the most influential information source is going to be the mortgage broker, and family and friends. For a 25-year-old, online would probably be more likely. But there is also a decision point.”
The remaining 10 per cent of the panel said that "general media" was the most influential source of information for consumers on mortgages.
Keep an eye out next week for more findings from the Deloitte Australian Mortgage Report 2017.
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