Powered by MOMENTUM MEDIA
SUBSCRIBE TO OUR NEWSLETTER SIGN UP
Brokers driving competition, pulling away from majors: MFAA

 

 

Website Notifications

Get notifications in real-time for staying up to date with content that matters to you.

Brokers driving competition, pulling away from majors: MFAA

competition run brokers ta competition run brokers ta
Annie Kane 6 minute read

The third-party channel settled nearly $200 billion of home loans in the year to March, with a record share going to non-major lenders, the MFAA’s latest Industry Intelligence Service report has found.

The Mortgage & Finance Association of Australia’s sixth edition of its Industry Intelligence Service (IIS), compiled by Comparator (a CoreLogic business), looked at data supplied by 13 aggregators (rather than the usual 14, as per previous reports, which previously included eChoice) for the six months ending March 2018.

With one less aggregator participating this period, it has impacted some results, the report noted, such as the reported size of the broker population (reports as 16,787, down from 16,940 on the prior six months).

Greater competition and diversification

However, while some figures are affected by the fact that there is one less data source than in previous editions, the report shows that brokers settled the largest volume of home loans since reporting began, at just under $200 billion ($199.57 billion) in the year to March 2018.

Advertisement
Advertisement

Looking at the six months to March 2018, the report found that brokers settled $97.63 billion of loans, up by 3.2 per cent on the prior corresponding period (and would likely have been larger if 14 aggregators were included in this period).

Interestingly, the data also showed that brokers were driving competition among lenders, with the market share for the big four banks dropping to its lowest levels.

The share of loans going to ANZ, CBA, NAB and Westpac (and their subsidiaries/affiliates) dropped from 50.6 per cent in the quarter ending December 2017 to 48.3 per cent in the quarter ending March 2018.

Further, the MFAA revealed, in advance, the statistics for the April to June 2018 quarter, which showed that the proportion had dropped markedly again to 45.7 per cent.

Meanwhile, the market share for other lenders has increased to its highest share since recording began, rising to 30.2 per cent for the six months to March 2018 and increasing to 32.7 per cent for the April to June 2018 quarter.

According to the report, the decision to publish figures in advance was made as the data was available and “due to the current climate of royal commission policy hearings”.

“[W]e have published in advance the April to June 2018 lender market share data,” the report reads.

“This data shows that the market share of the broker channel for lenders other than the major banks and their affiliates has again increased and now stands at 32.7 per cent, up from 21.4 per cent just four and a half years ago when this type of data was first reported.

“This is the highest share since recording began. In contrast to this, the market share directed specifically towards the major banks was at the end of June 2018 at its lowest recorded, sitting at 45.7 per cent, down from 58.5 per cent in 2013.”

The total value of lending directed to these lenders has also hit a record high of $15.1 billion for the latest quarter, up from the initial $6.7 billion in July to September 2013.

The sixth edition of the report also revealed a “major spike” in brokers offering diversified services, with a 25 per cent increase in the number of mortgage brokers also writing commercial loans — to just under 3,700 brokers.

These brokers wrote close to $9 billion in commercial loans for the six-month period ending March 2018.

Further, the IIS report also found that the broker channel continues to be the channel of choice for residential lending, with the market share at 55.3 per cent for the January–March 2018 quarter, representing the strongest January–March quarter recorded.

“Growth has flattened overall”

However, other trends noted in the report were less rosy.

The report noted:

  • Broker population growth and broker remuneration remain steady for the third reporting period in a row.
  • The national average number of loans per broker remains 18 applications over six months.
  • The conversion rate of loan applications to settlement has decreased to its lowest level for the past five years (“this could indicate that brokers may still be adjusting to lender assessment criteria, or as other data suggests, they are submitting business to a wider range of lenders,” the report suggests).
  • The average value of loans settled per broker continues to decline (from $6.9 million to $5.8 million per broker), “reflective of the broker population size coupled with lending contracting”.
  • The number of female brokers has declined to 27.1 per cent, continuing a downward trend since the April–September 2016 quarter, with 92 fewer females in the industry, the first time that the female population has declined in absolute numbers since recording began.

Launching the report, MFAA CEO Mike Felton commented: “Our IIS reports are an important set of data for the industry in order to quantifiably demonstrate the economic value of the services that brokers deliver.

“The latest findings reinforce the value proposition of mortgage brokers, creating choice and competition in the mortgage market by placing business with a wide set of lenders, many of which do not have a branch network.”

Noting that the data in this edition suggests that the industry is entering a period of consolidation with some key per-broker and industry performance indicators slowing, or in some instances contracting, Mr Felton commented: “In my conversations with industry leaders, most would agree that growth has flattened overall. Many of the per-broker measures in this report show a flattening of performance across the industry. This suggests more impetus for mortgage broker diversification into commercial lending.”

Mr Felton continued: “Another key finding that needs highlighting, as it’s an industry-wide issue, is that the proportion of female mortgage brokers has once again dropped, now at 27.1 per cent.”

The MFAA head outlined that the association was progressing with an “industry-wide initiative”, in conjunction with industry partners, “to look at solutions to promote the broker profession as a career for women”.

A report on this initiative is expected for release later this month.

[Related: Broker market share reaches ‘record’ high]

Brokers driving competition, pulling away from majors: MFAA
competition run brokers ta
TheAdviser logo
competition run brokers ta
Annie Kane

Annie Kane

Annie Kane is the editor of The Adviser, Australia’s leading magazine for mortgage brokers.

As well as writing news and features on the Australian broking industry, the mortgage market, financial regulation, fintechs and the wider lending landscape – Annie is also the host of the Elite Broker podcast and In Focus podcasts and The Adviser Live webcasts.

Before joining Momentum Media in 2016, Annie wrote for a range of business and consumer titles, including The Guardian (Australia), BBC Music Magazine, Elle (Australia), BBC Countryfile, BBC Homes & Antiques, and Resource magazine.

You can email Annie at: This email address is being protected from spambots. You need JavaScript enabled to view it.

 

FROM THE WEB
more from the adviser
Brokers buoyed by shift in mortgage landscape

Political and regulatory developments are conspiring in favour of...

Westpac amends residential lending policy

The major bank and its subsidiaries have made changes to their re...

Lack of home ownership disadvantaging Gen Y SMEs

The low level of home ownership among younger age groups has play...