EXCLUSIVE: The lengthy delays affecting broker-lodged loans have negatively impacted how borrowers view the broker experience, new data has shown.
The findings come from Momentum Intelligence’s Consumer Access to Mortgages report for 2021.
Now in its third year, the Consumer Access to Mortgages report explores the experiences of consumers across Australia (including those who have never secured a mortgage) to better inform industry stakeholders on the behaviour, expectations and experiences that drive the decisions that consumers make when accessing finance. This year’s report aims to help deepen the industry’s understanding of how consumers perceive mortgage brokers and proprietary channel lenders across a range of factors.
The Consumer Access to Mortgages survey included 1,036 consumers between January and April 2021.
This year’s survey found that the mortgage broking channel continues to be the preferred channel among existing borrowers, with 60 per cent of all borrowers intending to use a mortgage broker the next time they take out a mortgage. This level of preference is in line with the flow of new mortgages being written via mortgage brokers and reflects the strength of the mortgage broking industry.
As with previous years’ reports, broker clients are also much more likely to use a broker again for future lending needs (83 per cent of broker clients would return to this channel), with less than two-thirds (61 per cent) of direct clients saying they would go direct again.
Similarly, the majority of prospective borrowers (“future first-home buyers”) were also found to be more likely to engage with a mortgage broker rather than working directly with a single lender (56 per cent vs 39 per cent).
This preference highlights that the broker proposition has continued to resonate even with those who are yet to make their first move in the property market.
It also echoes recent research conducted by ActivePipe Why Borrowers Choose Banks vs Brokers, which found that 80 per cent of broker clients would use a broker again for their next transaction.
While choice of channel continues to be strong, this year’s Consumer Access to Mortgages report did note that satisfaction is falling.
Momentum Intelligence found that 72 per cent of consumers who had engaged a mortgage broker in the previous 12 months said they were satisfied, while a slightly lower figure (68 per cent) of proprietary channel customers were happy with their experience.
While the proprietary channel satisfaction was consistent with the 2020 survey, the gap in broker satisfaction has reduced significantly when compared with previous years, with broker channel satisfaction dropping by 16 percentage points in a year alone.
Brokers continue to be well rated for their communication with clients (85 per cent vs 69 per cent), which was particularly important during peak COVID-19 outbreaks, but the lower levels of satisfaction correlated highly with frustrations around speed of approvals for loans via the broker channel.
Indeed, while borrower satisfaction with speed of approval was low across the board, (at just 57 per cent overall), these figures were better for proprietary customers (61 per cent) compared to broker customers (53 per cent).
The issue reflects publicly acknowledged turnaround time disparities between the two channels. Speaking at a hearing of the standing committee on economics during their ongoing Review of the Four Major Banks and other Financial Institutions in April, the chief executives of the four major banks all conceded that the “time to yes” for home loans was faster when customers went direct, which they attributed to range of factors including technology, access to customer data, and less complexity in borrower demographic.
For example, CBA data shows that its median times for home loan approvals during the March quarter, were 1.7 days direct, but 14.7 days via broker, while NAB was at 3.8 days vs 8.3 days and Westpac was 11 days vs a whopping 23 days.
Indeed, the monthly Broker Pulse survey from Momentum Intelligence shows that – across all lenders used by broker respondents – turnarounds had blown out to an average of more than 11 business days in early 2021. Moreover, the Australian Finance Group (AFG) Index for April 2021 revealed that lender turnaround times surged to 27.1 days in the third quarter of the 2021 financial year (3QFY21) from 25.2 days in 2QFY21.
Brokers continue to experience delays in turnarounds now (however, there are green shoots of improvement filtering through, with the average time to initial credit decision across all lenders down to an average of eight business days in July 2021, its fastest time since the pandemic first hit in March 2020).
But the damage appears to be done; with consumers less satisfied with their brokers because of it.
Trust levels across both channels also fell in this report, with the broking channel dropping from 89 per cent in 2020 to just over 83 per cent in 2021. While for the proprietary channel it has dropped at a faster rate from 67 per cent in 2020 to 57 per cent in 2021.
Speaking of the issue, Momentum Intelligence’s head of strategy, Michael Johnson, said that while turnarounds are generally outside of a broker’s control, the way they communicate these delays to clients early – and staying across how turnarounds are faring – is key to mitigating later frustrations in the home loan process.
He said: “With the significant differences in turnaround times between lenders, it’s critical that brokers go above and beyond to communicate status updates to their clients to maximise their satisfaction.
“This data shows clearly that clients who experienced much slower turnaround times were less satisfied with their broker. That’s why brokers must take a proactive role in communicating application status updates.
“It has been a really challenging period for brokers and their clients and our data shows that brokers that communicate better receive higher rates of satisfaction, even if the lender turnaround times are slightly longer.”
Find out more about what borrowers (and future home buyers) think of the mortgage experience, in the Consumer Access to Mortgages report 2021 – available to download from Momentum Intelligence.
[Related: Turnarounds continue to quicken]
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.
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