Mortgage brokers are finding it tougher to secure refinancing for their customers at a time of rising arrears, due to higher interest rates coupled with increased processing times in loan application approvals, new research by a global data, analytics and technology company has shown.
The Equifax Mortgage Broker Pulse Survey 2023 polled 569 brokers and 416 consumers in May to understand the impact of increasing constraints on the industry.
Thirty-eight per cent of mortgage brokers believed rapidly increasing interest rates are impacting applicants’ eligibility for loans and have caused the most significant delays in application approvals over the past 12 months, while 31% identified lender service level agreements as a leading concern. For a further 11%, affordability constraints due to inflation and static wages were also a cause of delays.
Mortgage demand dropped -11.1% year-on-year; but refinancing continues to rise, the latest Equifax Quarterly Consumer Credit Insights for March 2023 found. Equifax data also showed that refinancing enquiries accounted for up to 44% of all mortgage demand in April. This trend is tipped to continue, with 22% of brokers expecting to take on more refinancing loans in the next 12 months as borrowers look to ease cost-of-living pressures.
This view is backed by figures from the Australian Bureau of Statistics, which showed refinance activity hitting a new record high of $21.2 billion in March, with the value of external refinancing 28.5% higher compared to a year ago.
“Our survey highlights some of the challenges mortgage brokers are facing as mortgage refinancing increases. It also shows that they are looking for ways to harness technology to improve efficiencies, increase productivity, and boost margins,” said Moses Samaha (pictured above), executive general manager at Equifax.
To remain competitive, 16% of brokers have completed more borrowing capacity assessments, and 15% have increased lead generation and follow-up work this year. There were 21% of brokers, however, who were concerned they were spending too much time keeping up to date with lenders’ offerings. Twenty-eight per cent of brokers also considered staying informed about regulation and compliance as important.
A disconnect with consumer demands
The rapidly changing economic environment is making it harder for brokers to secure refinancing options for their consumers, impacting their business and putting consumers in a more precarious financial situation. But that’s not the only factor impacting broker businesses, the Equifax Mortgage Broker Pulse Survey 2023 showed.
“While consumers are feeling most concerned about the impact of interest rates (32%) and their financial situation (22%), we could see that there is a gap emerging between what consumers expect and what the brokers consider relevant,” Samaha said.
“These are things that don’t depend on the economic context and could easily be the differential for many businesses. With one in four respondents saying trust in the broker is an area of concern when applying for a home loan, not addressing any potential disconnects can seem like a missed opportunity.”
Sustainability, for instance, is a priority for 30% of consumers, but only 4% of brokers would have placed green loans at the top of their lists when considering what their customers want, the survey found. Similarly, 38% of consumers wanted their broker to provide more support and better service when they were first approached and during the preliminary assessment, but only 9% of brokers focused on the initial consultation and just 8.7% on the preliminary assessment.
Leveraging digital and AI tools
A growing number of mortgage brokers were leveraging technology to seek competitive advantage, with 21% indicating the use of digital and AI tools to improve efficiency. Some 16.5% of respondents, meanwhile, plan to adopt new digital solutions to automate processes in the next 12 months, while a further 17% will adopt new digital solutions to improve customer experience.
Digital ID verification, client affordability assessment platforms, and tools for improving business processes are all being used by brokers to enhance customer experience.
“While there are some areas where broker and customer expectations aren’t perfectly aligned, providing a top customer experience is still very important to the broker community,” Samaha said. “By tapping into emerging technologies, brokers can better understand their customers’ needs and continue to be trusted partners to consumers, particularly in turbulent times.”
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