The strength of the third-party channel and the value that brokers provide to consumers is overpowering mainstream media scrutiny, according to a new report.
Released this week, the Deloitte Australian Mortgage Report 2018, based on a roundtable discussion and survey of some of the biggest decision makers in the mortgage industry, found that the popularity of mortgage brokers among the public continues to defy media criticism and ongoing scrutiny.
Roundtable participants were asked to rank information sources for their influence on consumers when considering mortgage products. These sources included the media in general, traditional banks, social media, mortgage brokers, and family and friends.
“The most popular response was family and friends, followed by mortgage brokers,” Deloitte financial services partner James Hickey said.
“People may look at general media to get an understanding of how mortgages and products might work, but for decisions they seek specific support.”
Deloitte’s Heather Baister said that in a “resounding vote of confidence” for the third-party channel, brokers have been viewed as a significant source of information for consumers.
“This is despite a lot of commentary by the media on the mortgage broking industry over the last 18 months or so, some of which has been reasonably critical,” Ms Baister said.
“But what we have actually seen is, over the last 12 months, the proportion of loans being written by mortgage brokers has increased from about 53 per cent to 55 per cent.
“When we think about the consumer choices and the decisions they are making and how they wish to engage with the industry and lenders, clearly mortgage brokers are still very much at the forefront there.”
According to Ms Baister, the challenges for lenders going forward will be adapting their processes to meet this customer preference for using mortgage brokers, rather than trying to force customers to use other channels.
“We are seeing a clear choice by consumers that they want to talk to mortgage brokers.”
Two in three new loans written by a broker
Deloitte Access Economics (DAE) director Mike Thomas revealed that the group has been doing some extensive work into the mortgage broking industry, the findings of which will be released in a comprehensive report in the coming weeks.
This will explore the value that brokers provide to Australian consumers.
“What we are finding is that customers are voting with their feet and two out of three new mortgages are originated via brokers. We have been looking at why that is,” Mr Thomas said.
“While the industry itself admits that they are not without blemishes, that’s not to say that we should throw the baby out with the bathwater. There is still a lot of value provided by mortgage brokers.
“If there are issues they need to work on to make the service even better, then so be it, but don’t lose sight of the fundamental proposition of why brokers are there in the first place — to navigate people through what is a really complicated, complex decision, particularly if they are time-poor and don’t have much financial literacy or live in remote areas with few bank branches.”
Borrowers unfazed by negative news
Brokers have been the target of a number of negative media reports lately as the mainstream news outlets capitalise on the release of the ASIC report into broker remuneration, the Sedgwick review, the Productivity Commission’s draft report into competition in the Australian financial system and the televised hearings of the Hayne royal commission.
“I suspect that a lot of the public on the street may have seen some of the commentary in the media, but I don’t think they necessarily would have seen as much as all of us working in this world daily,” Ms Baister said.
She added that the recommendation of a mortgage broker by family and friends is also a significant factor in the trust that the broking profession has built with the public.
“I think what you will find is that those family and friend recommendations often link into the broker groups. You do find that family and friends recommend brokers that they have used. The two are often interlinked.”
[Related: MFAA launches major broker advocacy campaign]