The number of finance brokers has increased by 3.3 per cent, a level which could be unsustainable, according to Mortgage & Finance Association of Australia CEO Mike Felton.
A new Industry Intelligence Service (IIS) report from the MFAA has revealed that the population of Australian brokers has increased to 16,009, with more than 500 brokers recruited within a six-month period between October 2016 and March 2017.
Echoing the sentiment from the previous IIS report, the MFAA stated that despite the increase in number, new lending rose by only 0.1 per cent — which has concerned the MFAA, given the supply and demand imbalance in the industry (with a ratio of 1 broker per 1,500 clients).
“In all except the two smallest markets, the number of brokers recruited by aggregators exceeded materially the number of brokers who left,” the report revealed.
‘Grounds for caution’
When commenting on the findings, Mr Felton was apprehensive about the new data.
“This is a strong performance in the context of investor and interest-only prudential measures imposed by regulators during the period; however, there are some warning signs that we need to be taking note of,” Mr Felton said.
“While the improved broker coverage is positive for consumers, these statistics should be seen as grounds for caution and need to be closely monitored.
“It is not a sustainable trend to have broker numbers continually rising faster than the value of new business written and could be part of the reason why the report shows the average income for brokers is down [by] 6 per cent nationally.”
The CEO added that growing broker numbers will likely lead to a reduction in the average brokers’ money pot, with IIS stating that upfront annual remuneration has decreased from $142,500 to $133,500.
“When the pie stays the same size and there’s more mouths to feed, the slices inevitably get smaller,” the CEO continued.
The report also noted changes in the use of loan products, with loans written by brokers using white label products increasing to $6.2 billion over the same period.
Diversification ‘strengthens the broker proposition’
“This report is showing a shift in the broker use of loan products from majors and regionals aligned to majors to specialist lenders, international lenders and broker white label products.
“Greater diversity is good news in that it strengthens the broker proposition and competition within the mortgage market,” Mr Felton said.