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Commercial loans settled by brokers rises to new high

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Annie Kane 4 minute read

The value of commercial loans settled by brokers in a six-month period exceeded $9 billion in the April-to-September 2018 period for the first time, new statistics show.

The findings come in the MFAA’s Industry Intelligence Service (IIS) Report, compiled by CoreLogic business Comparator, covering the six-month period to September 2018.

According to the report, the proportion of mortgage brokers that had written a commercial loan through the 13 aggregators included in the report had contracted on the previous six months (ending March 2018) – down by 51 brokers, or 1.39 per cent, to 3,617.

The vast majority of the period-on-period drop was due to fewer Queensland mortgage brokers writing commercial loans, with 57 fewer brokers writing these deals (however, fewer brokers in WA and SA wrote commercial loans in this half-year period, too). Despite there being fewer Qld brokers writing these loans, the value of loans written increased by $1.61 billion (or 22.65 per cent) in the Sunshine State.

Meanwhile, more brokers in Vic and NSW/ACT were writing commercial loans – with numbers rising by 26 and 24, respectively, in the six months ending September 2018 – but the value of loan amounts dropped by around 3 per cent in these states (by $105.6 million and $81.42 million, respectively).

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While the report has not accounted for the reason for the contraction in 2018, the MFAA suggested that reasons may include “the lack of commercial business opportunities arising, mortgage brokers doubling-down on their core mortgage broking services, or restrictions in commercial credit making it more difficult to trade”. 

“At a time when diversification is important, any ongoing downward trend in the number of residential brokers also writing commercial products going forward would be a concern for the industry,” it said.

However, when comparing the six months ending September 2018 to the prior comparative period, there were 685 more brokers (or 23.36 per cent more) writing commercial loans via their aggregator panel.

Indeed, the IIS 7 Report shows that the total book value for commercial lending hit a new record high in the period ending September 2018, hitting another record value at just over $40 billion.

The commercial book value increased by $1.97 billion or 5.18 per cent between the six months ending March 2018 and the six months to September 2018, taking the value of commercial loans settled for a six-month period to over $9 billion for the first time.

Looking at the figures on a year-on-year basis, brokers wrote $200 million more loans (or 2.26 per cent) in the six months to September 2018 than they did in the same period in 2017.

Year-on-year growth in the commercial loan book value was 14.03 per cent or $4.93 billion.

“Whilst this is a positive result, the mortgage/commercial broking sector appears to be going through a period of stable results and isn’t experiencing the same rate of growth experienced over the two years, between April-to-September 2015 to April-to-September 2017,” the report states.

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As previously announced by the MFAA, broker market share hit 59.1 per cent in September, marking the largest year-on-year market share growth in the previous four years.

However, despite this increasing market share – and the fact that the number of brokers surpassed 17,000 for the first time in this six-month period – brokers settled $97.92 billion in loans for the latest period, a 0.2 per cent decline when compared on the equivalent period in 2017.

Speaking of the mortgage figures, MFAA CEO Mike Felton elaborated: “This period continues the recent trend of steady but slowly declining results across the measures of the national average value of home loans settled per broker and the national average number of new home loan applications lodged per broker. 

“Since October 2016 to March 2017, the average value of home loans has decreased by 2.71 per cent, from $5.91 million down to $5.75 million, and over the same period the average number of loans lodged has decreased from 19 to 17 nationally. This is despite broker market share increasing, and the value of home loans settled by brokers at near record highs.”

Mr Felton highlighted that there had been an “unfavourable relationship” between the growth in broker numbers in NSW/ACT (increasing by 3.5 per cent) while the value of loans settled in these states dropped by 6.2 per cent. However, he noted that Victorian broker numbers rose by 3.6 per cent in the period, and increased the value of loans settled by 8.7 per cent.

More to come.

[Related: Broker market share hits new record-high]

Commercial loans settled by brokers rises to new high
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Annie Kane

Annie Kane

Annie Kane is the editor of The Adviser and Mortgage Business.

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

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

 

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