Broker numbers are tipped to fall by up to 5,000 as lending volumes slide, commissions are cut and regulation nears implementation.
According to Mark Hewitt, general manager of sales and operations at Australian Finance Group (AFG), market conditions are the toughest he has seen in 20 years and are set to drive broker numbers down.
“There’s definitely going to be pain and some brokers will start to question where they are and what they are doing,” he told Mortgage Business.
“There’s going to be consolidation; at the moment there are around 15,000 brokers nationwide but I’d expect that number to fall to around 10,000 after commission restructuring and regulation take effect.”
Ray Hair, chief executive officer of PLAN Australia agreed that market conditions would “shakeup” broker numbers in some sectors.
“I’d expect attrition to come mostly from those brokers on the edge of the industry – those who aren’t working fulltime or those with other business interests,” he said.
Like AFG – which reported a 31.5 per cent slide in loan volumes from May 2007 to May 2008, its lowest monthly loan sales on record – PLAN Australia also expected lower loan volume growth in the year ahead.
“I don’t think we’ve actually seen a market like this in past years. We have a combination of factors influencing the market – from high inflation to high interest rates,” Mr Hair said. “We are experiencing only half our usual business growth.”
But despite the current challenges, Mr Hair remains positive about the long term potential for the industry.
“It’s all about leveraging opportunity, that’s what we are communicating to our brokers. Those businesses with strong business models will be the ones to endure the market conditions.”
Judith Fiander, director of operations with brokerage Centric Lending Services concurred that the coming 12 months would be challenging, but also saw significant opportunity.
“We’re preparing for interest rates to stay at this level for some time yet and for credit to remain tight – the pie of loans being written is quite simply a smaller pie,” she said.
“Having said that, at a macro level it’s quite exciting: markets change, products and organisations come and go, and we are at the beginning of a new period for our industry. There will be new opportunities, even if we can’t quite see what they are yet.”
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