Complex loans driving greater broker market share

by Miklos Bolza20 Dec 2016
A new report from Macquarie Research has provided evidence that mortgage brokers are benefiting from the increasingly complex nature of home loans on the Australian market.
With majors moving away from a single mortgage SVR reference rate and now using four distinct pricing points, researchers suggested that these added layers of complexity could arguably result in more consumers looking to brokers for advice.
“Broker flow now makes up over half of total mortgage flow in Australia, with expectations that this will continue to rise,” the report stated.
This presents some risks to the major banks in the medium-term, researchers found, including loss of revenue to brokers through commissions, and the increased chance of customers switching to a competitor.
Evidence of this can be seen in the decreasing market share of the major banks with data from Mortgage Choice showing that building societies, credit unions and non-banks are picking up some of the flow off.

“Against this backdrop we see mortgage brokers as well placed to benefit from the added complexities in the mortgage market in recent times.”
Through analysis of mortgage pricing trends and from speaking with professional mortgage brokers, researchers found that competition had eased in the industry in recent months. They also estimated that front-book discounting had reduced by around 20 or 30 basis points from peak levels.
However, despite the loss of market share to the major banks, the report also found that increased rates on variable investor loans offered by the big four boosted margins by one to two basis points and increased overall earnings by approximately 1%.
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