How the broking industry can flourish during uncertainty

The Australian housing market has been experiencing a downturn for many months, caused - unusually -  by a clampdown on credit, rather than the usual catalysts of higher interest rates or a weak economy.

CoreLogic forecasts this housing decline will progressively lose momentum through 2019 before levelling out in April 2020, but the unique nature of the downturn does makes it harder for us to predict what the future holds. 

At the same time, negligible income growth (despite a very strong labour market) brings with it the economic risk that consumers will prioritise saving over spending, and this in turn suggests people are less likely to make huge decisions such as buying property in this sub-optimal climate. 

Despite uncertainty around this slowing housing market, there’s good news for brokers. Recent MFAA research shows that loans originating through the broker channel have increased over the past year, taking overall market share to a record high of 59.1 per cent. So, what’s behind this upwards trend for Australians to go via a broker instead of directly through a lender? 

First, the broker value proposition is nothing new. Brokers have always delivered significant value to time poor consumers. Comparing different components of mortgage products can involve a huge amount of work, and lenders are not always accessible when people are free outside of work hours. Brokers tend to be more flexible, and this makes it easier for people to find time to meet with them. In addition, the mortgage process is complex. There’s a huge array of products with different interest rates, fees and loan features, and there are products requiring different deposit amounts and with different repayment schedules. Brokers can provide welcome support for borrowers as they navigate this landscape. 

Now, we’re adding further complexity to the mix as lenders adjust their lending appetite. Securing a mortgage has become much harder and this means brokers have another role to play. They need to use their expertise and specialist knowledge to create a perfect alignment between the right lender and the right borrower. This capability will become even more important if the “best interest duty” suggested in the Hayne report comes to fruition. 

From a banking perspective as well, the broker channel provides a cost effective sales channel as well as instant distribution – and this is especially valuable for banks without a physical presence.

There are, of course, challenges that could slow this upward trajectory, such as banks investing further in their direct channel including streamlining the application process, or the possible introduction of up front broker fees, which could deter people from seeking mortgage advice.

So, how do you make sure you continue to be the preferred channel as the environment evolves further? 

The key to being a trusted adviser is building a long-term relationship with your client. Cultivate this partnership from your first conversation. This way you’re with them from the day, they get their first mortgage with you until the day they no longer need one.

To pull this off, create a business plan centred on this. Think of ways to revisit your existing customer base to provide them with additional value even if they’re not in the market for a new home loan. For example, CoreLogic provides several tools such as property profile reports and value forecasting that give you a reason to engage with your customer, and in turn keeps their mortgage product and your service front of mind. 

It’s a given that people’s circumstances will always change, legislation will always change and the market will always change. For banks and consumers, the broker’s expertise and ability to evolve their service in response to change provides consistency during these periods of upheaval. This is what will drive advocacy and see your business flourish over the long term.