New research suggests that the dominance of the big four banks is being undermined by a growing dissatisfaction among mortgage brokers.
THE MAJOR banks are falling well behind in their broker offerings. Information gathered by Momentum Intelligence for its Third-Party Lending Report: Major Banks 2017 reveals what brokers really think of the big four banks across eight key metrics. In partnership with The Adviser, Momentum Intelligence surveyed over 600 individual brokers who rated each of the major lenders on product, pricing and policy, product range, turnaround times, BDMs, credit assessment staff, client support, training and education, and commissions.
WHAT THE FIGURES SHOW
The Adviser has conducted a brief comparative analysis of this year’s findings against the non-majors (rated by brokers in 2016) and non-bank lenders for this year.
While the big four have fallen behind their smaller competitors in the eyes of brokers, a comparison with last year’s major bank results reflects a significant decline in broker sentiment across all metrics.
The crux of the findings is clear: Australia’s big four banks have largely fallen out of favour with mortgage brokers.
‘Collectively, the major banks achieved an overall average score across the eight metrics of 3.54, down from 3.87 in 2016.’ By comparison, the non-banks scored an average of 3.93 this year, reflecting a stronger broker offering across all metrics. Last year, the non-majors scored an average of 3.69, outperforming the big four in 2017.
The best area of performance among the majors this year, as rated by brokers, was for product range. In this metric, the big four collectively scored 3.91, down from last year’s 4.04 and behind the non-banks (4.00) and nonmajors in 2016 (3.96).
The worst performance across all metrics this year was for turnaround times, where the majors achieved a score of 3.25, down from 3.88 in 2016. By comparison, the non-banks scored 3.90 and the non-majors (2016) 3.47 in the same category.
Turnaround times have been a consistent issue for the thirdparty channel. While the nonmajors are not immune to this, many brokers have expressed their frustration at the poor turnaround times of one major bank in particular.
Sentiment towards this lender turned sour when reports surfaced that the group was using brokers as a lever to curb investor lending and was making a conscious effort to direct borrowers to its branches.
|WHAT BROKERS SAY|
ANZ A STANDOUT
Others have been more supportive of the broker channel. ANZ, which brokers rated the best of the big four this year, has been consistent in its third-party offering and managed to outperform its peers in the Momentum Intelligence report.
The group’s commitment to brokers is best reflected in the remarks of its CEO.
In an interview with The Adviser last year, ANZ chief executive Shayne Elliott explained the significance of the third-party channel to the group’s home lending business.
“Our customer base in Australia feel that brokers are a good way to look at the market overall and make the best decision, so there is demand for it,” Mr Elliott told The Adviser.
“Secondly, for ANZ what we find is that brokers are a terrific way to acquire new customers. Somebody who is not already an existing customer of ANZ is unlikely just to wander into a branch or call up the call centre and ask about a mortgage. But they do talk to brokers.”
Mr Elliott also explained why the broker channel typically delivers larger mortgages for the bank.
“If I’m going to get a mortgage for $1 million, I’m much more likely to want to get that validated by price shopping, looking at terms and conditions and validating my decision through a broker,” he said. “If it’s a smaller $200,000 mortgage, I may be less inclined to do so. So it tends to skew to a higher value as well, which is not a bad thing from the bank’s perspective, as long as it is not too large.”
Mr Elliott is clearly supportive of the third-party channel and understands what brokers need at a granular level. This is evident in his comments on turnaround times.
“Brokers really want a bank that can respond quickly,” he said. “They want to help their customer get into their house. They need a response quickly and one they can rely on. We have worked really hard at speed and turnaround. We are a very competitive bank from a broker point of view.”
It’s worth noting that unlike some of its competitors, ANZ does not have an ownership stake in mortgage aggregation businesses.
|MAJOR BANKS SLIP SIGNIFICANTLY IN 2017|
|Product, pricing and policy||3.59||-7.00%|
|Credit assessment staff||3.41||-9.00%|
|Training and education||3.44||-7.00%|
MAJORS LOSING MARKET SHARE
Notwithstanding ANZ’s dominance in this year’s findings, the majors have collectively been losing broker market share for some time. The findings of the 2017 Momentum Intelligence research are consistent with industry trends.
For example, the latest AFG Competition Index found that the big four lost 6.55 per cent share of broker-originated loans over a 12-month period.
The major banks and their subsidiaries (ANZ, CBA, Bankwest, NAB, Westpac, Bank of Melbourne, Bank SA, and St.George Bank) saw 65.25 per cent of all mortgages written to them through the broker channel in the quarter to February 2017, according to the Index.
While this figure is up from the low of 64.09 per cent in the quarter to December 2016, it is markedly down from the comparative period last year, when the majors accounted for 71.8 per cent of all mortgages written by the third-party channel.
Notably, refinancing through the major lenders hit a record low for the quarter ending February 2017, dropping to just 54.93 per cent of market share, while the proportion of investor mortgages being written to the major banks also fell to a record low in the quarter ending February 2017, to 67.56 per cent of market share. This is around 7 per cent less than the same period last year.
As part of the Momentum Intelligence research, brokers were asked to comment on the performance of the major banks across each metric.
The responses were mixed, ranging from high praise for BDMs to harsh criticism of poor turnaround times and credit assessment staff. They largely reflect an inconsistent broker service provided by the big four banks.
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