Younger Australians are dominating the mortgage broker market, with a new Roy Morgan research revealing that almost half of home loan borrowers who used a mortgage broker over the past five years were Millennials.
According to Roy Morgan’s Single Source survey of more than 50,000 borrowers, approximately 48.6 per cent of mortgagors who used a mortgage broker to obtain a home loan over the past five years were Millennials (defined as being born between 1976 and 1990), a larger share than any other generation.
The data showed that more than a third (38.8 per cent) of borrowers who used mortgage brokers to obtain a loan over the past five years were from Generation X (born between 1961 and 1975).
When combined, the data showed that nearly 90 per cent (87.4 per cent) of mortgagors that had used a mortgage broker in the last five years were between 57 and 28 years old (i.e. Millennials and Generation X).
However, less than half of all Millennials (42.5 per cent) that had taken out a home loan in the last five years had said they went to a broker.
While the data showed that younger Australians were using brokers, the trend did not hold for those under the age of 27.
Just 3.1 per cent of those using a mortgage broker were from Generation Z (born between 1991 and 2005).
The research also found that relatively few mortgage broker clients were older Australian.
Baby Boomers accounted for 9 per cent of those using mortgage brokers for their home loan, while 0.5 per cent of Pre-Boomers (those born before 1946) went through the third-party channel.
Further, the research revealed that of the Millennials with a current home loan of five years or less, 42.5 per cent used a mortgage broker, followed by Generation X (37.0 per cent), Baby Boomers (27.6 per cent), and Pre-Boomers (21.2 per cent).
Roy Morgan’s industry communications director, Norman Morris, shared his observation, saying: “The dominance of Millennials in the use of mortgage brokers to obtain their home loan is most likely due to a number of factors.
“These include the fact that this generation has grown up at a time when mortgage brokers were always there and so that they are seen as a very familiar way of acquiring a home loan. This is in contrast to the older generations that they may be less likely to use them and so be more used to going directly to a bank.”
Mr Morris also noted that Millennials could be turning to brokers for assistance in an increasingly challenging mortgage market.
“Another potential reason is that with rapidly rising house prices, combined with the fact that more Millennials are likely to be first home buyers, then mortgage brokers may be seen as possibly being a way of borrowing more as they have the potential to get a better interest rate,” Mr Morris added.
The research follows one released by Aussie Home Loans earlier this month which revealed that an increasing proportion of FHBs intend to use a mortgage broker to secure their loan.
Year-on-year, Aussie reported a 55 per cent increase nationally in the number of first home buyers using an Aussie broker.
“This is a hugely positive sign and shows savvy newcomers to the market are seeking out expert mortgage advice and guidance,” Aussie CEO James Symond said.
Further, speaking at an event hosted by ING last week, residential property manager at Rental Results Lauren Robinson and property investor Eddie Dilleen highlighted the role that mortgage brokers played in assisting them throughout their first home purchase.
Ms Robinson said: “They give you a really good understanding of how much you can actually borrow, so that was definitely my first step when I was looking.
“I just did not know how much I could borrow, and then I also really needed to know how much I needed to save and what my repayments were going to be, and then what was the cheapest no-frill mortgage rate option out there.
“I just wanted the best rate, the cheapest rate out there, and I felt like a broker was really able to help me find the best rate.”
Mr Dilleen, who purchased his first home at the age of 19, noted that brokers helped him decode mortgage jargon.
“When I first started looking to get my first property, I did touch base with a fair few different brokers,” the property investor said.
“One of the things that I didn’t understand was the nitty-gritty stuff. [Brokers helped simplify] the words that were out there.
“For example, I didn’t know what LVR was, how much money you need to have in savings, lenders mortgage insurance — nobody explained any of that to me.”
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