Third party customers behind greater mortgage risk

by Miklos Bolza16 Mar 2017
A new industry report has suggested a larger proportion of borrowers sourcing loans through the third party channel are more susceptible to interest rate changes than those opting to go direct.

Speaking at the release of J.P. Morgan’s Australian Mortgage Industry Report – Volume 24 in Sydney yesterday (15 March), Martin North, principal of Digital Finance Analytics who helped compile and analyse statistics from 52,000 households, said that broker clients had a higher intrinsic rate sensitivity than those going via the branch.

“You could argue that in a few different ways. Perhaps it’s the type of individual who goes by a broker instead of going direct. Perhaps a broker’s able to find a bigger loan relative to the income compared with what a lender might do. All sorts of things are in there.”

However, he stressed that these findings did not suggest that brokers were less responsible than banks. Rather, they highlighted the different mix of customer behaviour and customer types that go to brokers versus those who go to the branch.

“One of the critical lenses that we look at is … whether people are effectively soloists – meaning that they want the lowest price they can get – or whether they’re delegators – meaning they are more worried about customer experience and the whole package rather than the price.”

Because price is more important for clients who opt for a broker, this means those individuals have an urge to find the best deal through the third party, he said.

“Secondly, brokers have the ability to look across the market, across multiple lenders and they know in their experience where the best deals may be for that particular type of borrower at that particular point in time.”

Finally, North noted that multiple other factors have also come into play within these results. The type of loan, geographical area and sociodemographic trends also create a higher risk footprint in loans originated through the third party channel, he said.

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COMMENTS

  • by Clarke Kent 16/03/2017 8:47:05 AM

    Another absolute rubbish article with no evidence to support such speculative assumptions

  • by Broker 16/03/2017 9:52:06 AM

    Don't understand why this guy gets any airtime, consistency bags Brokers with unsubstantiated rubbish

  • by Rob B 16/03/2017 10:23:53 AM

    When will the media and commentators realise that Brokers actually do a better job in understanding a customer expense and income situation than Bank staff. A broker is required to have their client complete a proper expense budget and understand their flow of funds. In the majority of cases the customers expenses are higher than what the banks consider, as a Broker we are required by law to use the clients figures, this in most instances reduces the clients borrowing capacity or power. For goodness sake, give credit where credit is due and happy as a Broker to accept criticism when its warranted. Brokers do a much better role for their customers than Bank staff, I know I've been involved on both sides. Find real stories to write about.