A state government-financed lender has seen a sharp increase in broker-referred loans, which it believes reflects on borrowers needing to find flexible options in tough home finance conditions.
HomeStart Finance has seen a 55% increase in broker referred loans in the last two years and is expecting broker referrals to make up 25% of total new lending this financial year.
Homebuyers are increasingly turning to mortgage brokers to find niche products and home loan solutions with more flexible terms to get into housing, such as low deposit loans and shared appreciation products.
HomeStart CEO John Oliver says the increase in broker-referred loans demonstrates a clear customer need for more flexible home loan options, as well as demand from brokers for lenders who offer these innovative solutions.
“We have a unique position in the market in that we have an innovative product range, recognise government payments as a form of income and offer a higher loan to value ratio than most other lenders,” he says.
“This provides brokers with a strong alternative solution for customers who are struggling to meet the financial requirements of mainstream lenders, but don’t want to give up on their home ownership dream.”
Oliver says HomeStart recognises it is a “stepping stone” for brokers’ clients as it supports people to get into the housing market, before they move onto a mainstream lender after a couple of years.
“This approach provides an opportunity for brokers to bring a homebuyer through the door with HomeStart, and when they have built enough equity, help them refinance a few years later,” he says.
“Our research shows that a majority – 62% – of young people still believe home ownership is important, despite finding it difficult to finance.”
Figures from the Mortgage and Finance Association of Australia show the broker market claimed 47% of Australia’s new home loans written last year, as time-poor consumers sought independent advice and more choice.
HomeStart – which was created in 1989 by the Bannon government in response to the high interest rates at that time – is geared for growth on the back of this trend, aiming for 50% of new lending to originate from mortgage brokers by 2016, Oliver says.
“We have built a specific focus on the broker market over the last few years, as it is a good strategic fit with our distribution model.
"Brokers provide us with a cost effective channel to broaden our geographical footprint and we have invested in this channel to ensure we are a strong partner.”
In the past few years, HomeStart has built strategic relationships with aggregators, appointed two broker-specialist business development managers and rolled out a new front end loan system as well as a system – called ‘Tracker’ – which lets brokers lodge and track loan applications electronically.
This new system is LIXI compliant, providing an integrated gateway between aggregator CRMs and their front end loan system, Oliver says.
“Electronic document upload is in line with developments in the industry and we have been working hard to ensure we can provide the latest functionality to our brokers.
“We are aiming to reach our growth target in the next two years as our unique product proposition and service delivery becomes better known and the trend for consumers to use mortgage brokers continues to rise.”
ASIC weighs in on YourShare controversy
Bank home loan ads 'confusing and misleading', say consumers
Government 'failed' first home buyers: Lobby group