Bright days for brokers as industry predicted to boom

by Calida Smylie02 May 2014
A glowing report on the future of the mortgage broking industry predicts a high level of growth in the broker arena over the next five years.

While annual growth of the broker sector from 2009 to 2014 was estimated to be negative at -0.2% due to reduced credit volumes and flat house prices, market researcher IbisWorld forecasts annual growth of 5.3% as the industry will “break free of the shackles” of the GFC over the next five years.

Annual growth of the mortgage broking industry is forecast to be 4.9% for the 2013-14 financial year and is predicted to be worth $1.5 billion on the back of healthier year-on-year growth of 3.8% as demand and house prices grow. By 2018-19, the industry will be worth $1.9 billion, IbisWorld predicts.

The broker industry is made up of 5,740 businesses, with Australian Finance Group grabbing 20.5% of the market share, Commonwealth Bank getting 13.7% and Mortgage Choice netting 9.3%, the report said.

But competition and supply of finance are both projected to rise, as more lenders enter the market.

“This will contribute to growing demand for broking services as lenders continue to use brokers as a medium for distributing products. Broker penetration is expected to continue its upward trend.”

Part of the reason for this is because while mortgage broking is a relatively new occupation, being around only two decades, brokers have filled a gap in the market and are seen to provide comprehensive, convenient and unbiased advice to clients, IbisWorld said.

However, it is not all rosy for mortgage brokers. As the industry moves from a growth phase to a mature phase, brokers’ profit margins are becoming tight, forecast to average 20.3% of revenue over the next five years.

“This has forced industry players into action and resulted in the establishment of partnerships with real estate agents and other third-party sources…Although the goal is to increase their customer base, there is a need for brokers to focus on improving customer service, leveraging customers’ desire for personal service.”


Lenders speak up on broker's cancelled accreditation

Low rates pushing down bad debts for major

Small but steady growth, Big Four increase market share