Powered by MOMENTUM MEDIA
the adviser logo
Broker

Broker boom ‘unsustainable’, warns MFAA CEO

by Reporter4 minute read
Warning

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.

To continue reading the rest of this article, create a free account
Already have an account? Sign in

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.

Advertisement
Advertisement

‘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.

[Related: Broker numbers ‘may be reaching saturation point’]

Broker boom ‘unsustainable’, warns MFAA CEO
caution warning
TheAdviser logo
caution warning

JOIN THE DISCUSSION

You need to be a member to post comments. Register for free today

MORE FROM THE ADVISER

mark pesce futurist ajxjkn

Automation is changing, not replacing, the role of finance brokers

On Thursday (4 August), the Australian Financial Review (AFR) ran a story with the headline: “Finance brokers top...

READ MORE
des hang carbar zaheer jappie carclarity ta qtvnqr

CarClarity confirms partnership with car subscription platform

Established in March 2020, CarClairty is a finance platform that connects car buyers with more than 30 different...

READ MORE
anthony albanese profile ta vtpifc

Further grants confirmed for flood survivors, $47m pledged

According to a statement released by the federal government, the Back Home grant will be made available to impacted...

READ MORE
magazine
Read the latest issue of The Adviser magazine!
The Adviser is the number one magazine for Australia's finance and mortgage brokers. The publications delivers news, analysis, business intelligence, sales and marketing strategies, research and key target reports to an audience of professional mortgage and finance brokers
Read more