Value of broker-facilitated loans falls year-on-year

But broker market share hits quarterly record

Value of broker-facilitated loans falls year-on-year

While mortgage brokers continue to facilitate a high percentage of residential home loans, the value of home loans settled has dropped compared to the same time last year.

According to latest data released by research group Comparator and commissioned by the MFAA, the value of loans settled by mortgage brokers reached $89.58 billion over the December quarter (October to December 2022).

That represents a $6.07bn (6.34%) decline in the value of new lending year-on-year, the MFAA confirmed.

Mortgage brokers facilitated 69.3% of all residential home loans over the quarter: this was the highest mortgage broker market share on record for a December quarter, the peak industry body said, although it was down 2.4 percentage points on the September quarter of 71.7%. 

Broker market share has risen 2.8 percentage points year-on-year (66.5%) and is up 9.9 percentage points compared to the December 2020 quarter (59.4%).

In the March 2022 quarter, broker market share crept up to 69.5%, and was 68% over the June 2022 quarter.  Over the September 2022 quarter, broker market share was 71.7%, the value of home loans written by brokers reaching $94.4bn.

MFAA CEO Anja Pannek (pictured above left) said the results showed that Australian homebuyers continued to demonstrate their confidence and trust in mortgage brokers, particularly in the current environment of rising interest rates and cost-of-living pressures.

“With many Australians looking for guidance as their fixed rate mortgage reverts to a higher variable rate this year, mortgage brokers offer an invaluable service to their clients,” Pannek said. “They provide their clients with options based on their individual needs – whether that be staying with their existing lender or accessing competitive offers in market if the client chooses to refinance.”

Pannek said that reforms implemented over the previous two years, including Best Interests Duty had increased the level of trust that Australian homebuyers place in mortgage brokers, whether they be first home buyers, refinancing their existing loan, or buying an investment property.

Derwent Finance founder and CEO Emmanuel Marios (pictured above centre) told MPA he was not at all surprised that broker market share in the December 2022 quarter was the highest ever for a December quarter.

“I believe the negative stigma associated with broking is fading and the trust is coming back: people want more options, they want things done for them and their hand held, and we are here to do exactly that,” Marios said.

Referring to the annual drop in the value of loans settled by mortgage brokers, Marios said Derwent Finance had found the December 2022 quarter to be on the quieter side.

“We believe this could be due to it being already such an expensive time of year and people having to dig into their home savings,” Marios said.  “Additionally, as we see house prices increase alongside interest rates increasing and wages not increasing fast enough, it is getting harder and harder for people to borrow what they are aiming for.”

Although rapid interest rate rises through 2022 and early 2023 made the homeownership dream unrealistic for some, Marios said Derwent Finance was seeing more purchasers than ever before.

“We believe that this is due to specific applicants on dual incomes and or low debt thresholds and low living expenses,” Marios said. “We are also noticing a shift in the areas people are purchasing in to accommodate for the ever-rising costs of houses and interest rates: for example, Western Australia seems to be very popular among owner-occupiers at the moment.”

Referring to the December quarter figures, Adele Andrews (pictured second from right), director of Australian Property Home Loans, said she expected broker market share to have increased compared to the December 2021 quarter.

However, she was surprised that broker market share had declined compared to recent quarters.

“Given the current climate that we’re in, the need for expert advice, assistance and choice, I can only see market share growth getting higher and higher,” Andrews said.

In response to the drop in the value of broker loans settled, Andrews said this was an indication of the current market. Homebuyers are increasingly watching their pennies, and some are sitting on their hands anticipating further price declines, she said.

“I know from my own book, 98% of my business is refinancing. There are people still out there buying, but to hear new loan growth has slowed is not surprising at all,” Andrews said.

“I think we’ll probably see another drop this quarter … just until the RBA either pause or slow the aggression in which they’re raising rates.”

Andrews said she wasn’t feeling a financial impact of an overall slowdown in new lending within her own business, but she noted there had been a shift. Once households settle with where the market lands and what interest rates look like, Andrews said she expected them to reassess their buying options, whether it be to build on their existing portfolio or move house.

“There’s no lack of activity, but we’re coming out of a market where people have been so conditioned for the last 12 to 13 years that rates are going to go down - and that over the last three years, that rates were at a ridiculously low [level] that we’ll probably never see again,” Andrew said.

“I think once that level of education, acceptance and discomfort is removed, that’s when we’ll start to see things balance out.” 

Green Finance Group director Daniel Green (pictured above right) said he understood that seven out of ten residential mortgage borrowers now use a mortgage broker, which really speaks to "the level of professionalism within the industry".

“The sheer experience and broader application process and product knowledge an experienced broker brings to the table is invaluable to borrowers trying to navigate what can be an arduous corporatised process,” Green said.  
Whether it is a home loan or a business loan, brokers are in the best position to provide customers with a realistic choice of options - and simplify the process, he said. 
“We've worked hard to build our businesses initially based on trust and corresponding referrals and recommendations,” Green said. 
“Additionally, it's much easier for customers to now share these quality service experiences thanks to the internet and google reviews and clients are doing their own research and more readily seeking us out independently.”
Given interest rates are rising, reducing borrowing capacity, Green said that the annual drop in the value of broker-settled loans was not surprising.  Negativity of various media reports can also affect buyer confidence, he said.

“While the figures don't lie, I'd say that from a business activity perspective we've probably not felt this as much at a surface level due to the high level of enquiries we have receipted in the last 12 months,” Green said.

“It was a record year for us on all counts but yes refinancing is now dominating, and I can't see this changing in the short term.”

Green said there was a lot of “unnecessary fear” generated around borrowers rolling off fixed rates into a high interest rate environment.

“It’s not necessarily going to be a comfortable transition for some, but there are still good options out there and professional brokers will continue to work hard to find those better deals for clients,” Green said.

With refinancing taking centre stage this year, for Green Finance Group, it is business as usual.

“While we will adapt to market conditions, the commitment to basic processes and to supporting our existing clients doesn't change...we will continue to keep our clients informed of current market conditions, possible impacts of the higher rate environment, and help them to best manage their debt requirements accordingly,” Green said. 

 The figures, released by the MFAA each quarter, are based on the value of loans settled by 18 leading brokers and aggregators, as a percentage of ABS housing finance commitments.