Borrowers will continue to flock to mortgage brokers for their home loan needs, with the direct channel increasingly falling short of customer expectations, according to the managing director of a financial services firm.
Speaking on The Adviser’s Elite Broker podcast, Nick Reilly, the co-founder and managing director of mortgage broking and financial planning firm Inovayt, outlined his expectations for the industry over the 2020 calendar year.
Mr Reilly said he expects the major banks to continue losing ground in the mortgage market, from both a product and service perspective.
“I think what we’ll see this year is a move away from major banks,” he said.
“We’re already seeing it at the moment, you’ve only got to look at how aggressive the major banks are pricing cashback offers and trying to win business back.”
According to the Victoria-based broker, borrowers will increasingly look to the third-party channel for their finance needs, with bankers falling short of customer expectations in an increasingly complex mortgage market.
“We just find people within banks these days just not really equipped to deal with the loan process anymore, so I think the market share will just continue to move away from direct contact with a bank to the mortgage broking business,” Mr Reilly added.
Mr Reilly noted that he also expects brokers to reap the benefits of a pick-up in refinancing activity, as lenders race to sharpen their product offerings to capture a larger share of the market.
“I think we’ll see a lot of transition of clients moving from one bank to the other, with so many great offers to refinance,” he continued.
“Brokers can really take advantage of that and at the same time, look at their existing book and make sure it stays as it is, and they don’t lose clients.”
Moreover, the senior broker said ever-increasing compliance obligations in the third-party channel – particularly in light of the government’s best interests duty – would compel some independent brokers to join larger industry groups to reduce the burden.
“I think we’ll continue to see contraction in the industry, so given best interests duty and the increased compliance, what we need to do now to get a loan to a bank in a compliant manner,” he said.
“I think brokers will be looking for support, it’s too difficult to be out there on your own and isolated now.
He concluded: “[We’ll] start to see some contraction in the market where single or one or two-man operators will look to join other groups and really leverage off file management and administration.”
To hear more from Nick Reilly, tune in to the latest episode of The Adviser’s Elite Broker podcast.