Brokers react to startling first time buyer figure

Brokers spoke to The Adviser following the release of the Consumer Access to Mortgages 2023 report, conducted by Agile Market Intelligence and released in association with the Finance Brokers Association of Australasia (FBAA), which found that only 44 per cent of future first-time borrowers were likely to choose the mortgage broking channel for their first home loan.

The report found that a majority of future first-time borrowers (56 per cent) would go through the proprietary channel instead, with 53 per cent of 18–29-year-olds having the same inkling.

The fifth annual edition of the research was conducted between 13 and 27 September and used a sample of 1,263 responses that included 776 current mortgage holders and 487 non-mortgage holders.

Given that more than 71 per cent of home loans are originated by the broker channel, the managing director of the FBAA, Peter White AM, said the industry needed to look at ways to change the trend.

He commented: “This presents a challenge and a huge opportunity for brokers and we must look for ways to reach and educate first-time borrowers.

Speaking to The Adviser, chief operating officer at Derwent Finance, Rhianna Farnan, said “education is key” for brokers looking to attract first-time borrowers.

Ms Farnan commented: “Despite tight schedules and pressing deals, focusing on educating first-home buyers is crucial. They’re looking for understanding, especially regarding misconceptions like needing a 20 per cent deposit or getting a credit card to improve loan chances.”

Despite the research’s data, Ms Farnan said she often found that “young buyers often prefer broker guidance over outdated advice from their parents”.

She added that brokers needed to embrace what younger buyers related to, so warned against “fancy formal, jargon-filled meetings in a boardroom”.

Ms Farnan said she uses platforms such as TikTok to provide fun educational videos, to try and help make the step easier for an interested first-time borrower to schedule a “chat without feeling pressured”.

The Derwent Finance broker said the industry should also be in schools educating students.

She added: “I believe the industry should do more in schools to educate college students on not rushing into getting a credit card or car loan and the impacts it can have on your future home loans.

“In these programs this would be spoken by a mortgage broker and therefore promote mortgage brokers at the first stop when getting a home loan, this way it is in their mind for when they are ready instead of going directly to a bank.”

Mortgage broker at IFA Mortgages & Finance, Luke Harborne, told The Adviser that setting aside time to sit down and speak with first-time borrowers who might not even feel 'mortgage ready' is important, as it can help prepare and educate them on what’s possible and what’s available.

Mr Harbone commented: “There’s actually a lot more options that people don’t really know about, and they won’t discover until they actually sit down with a broker.

“Because if you’re an average Joe and you’re doing your internet [calculations] and you’re starting to look at all these different government schemes, they think: 'Oh great, I can buy something up to $800,000 and not pay stamp duty." But does that actually help them?'

“I think that’s where we can add a lot of value to those people who are just really starting out or in very early stages or are very green.”

He added that IFA Mortgages & Finance was looking at releasing educational videos on social media outlining misconceptions about the industry as they were finding many first-time buyers were still unaware of how it actually works.

“I still get asked by a lot of potential clients: 'How much do I have to pay you for this service?' It’s still this misconception that the client will have to pay a fee and while some brokers will charge a fee, we don’t,” he said.

“Other misconceptions also include: 'Are you putting me at a specific lender because you get extra incentives?... All these things just simply aren’t true anymore," he said.

As part of a move to help borrowers learn how brokers can help them, the FBAA is currently testing a new consumer-facing website BeforeULoan.com. Set to be launched in early 2024, the website aims to provide resources and broker contacts for “people who are just looking to find answers about their loans”.

[Related: How brokers are helping improve financial literacy]