This publication has been discontinued on October 28, 2011.
Below is the updated product.
Published: April, 2011
Product code: 220535
Summary
Introduction
The mortgage broker channel has assumed an pivotal role in the distribution of residential mortgages in Australia. However, pressure on broker commissions has led to serious concern among industry participants. This report looks at how the mortgage broker channel is changing and focuses on issues and challenges faced by brokers.
Features and benefits
• Track important broker metrics such as loan size, refinancing proportion and product set.
• Understand the impact of commission cuts on the mortgage broker channel.
• Learn the optimal structure of commissions to maximize broker satisfaction.
• Perfect your strategy with Datamonitor' s analysis, recommendations and forecasts.
• Learn about mortgage broker outlook, market predictions, concerns and attitudes.
Highlights
As consolidation occurs within the mortgage broker industry - and companies consequently become bigger - players can more easily offer a large panel of lenders. From a mortgage lender' s point of view, the closer they can tie their systems to large broker companies, the easier and quicker approval processes can become.
Given the drastic commission cuts experienced in 2008, it is not surprising that broker satisfaction with commission levels fell between 2007 and 2009. In 2007, 63% of brokers were very or quite satisfied, a proportion which had fallen to 21% by 2009. Over the same period, the very or quite dissatisfied proportion rose from 13% to 46% of brokers.
When asked to name the most important area for lenders to improve, 30% of brokers mentioned loan approval and turnaround times. Since long loan approval times can cost sales - and since there are no commissions to be made from a customer whose business has been lost - keeping loan approval times low is vital to mortgage brokers.
Your key questions answered
• How many lenders to brokers commonly use on average?
• What are the major areas of improvement brokers see in their lenders?
• What is the most highly regarded lender according to mortgage brokers?
• What are the key trends affecting the mortgage broker industry?
• How can lenders optimize their relationship with the mortgage broker channel?
Table of Contents
Executive Summary
Higher loan sizes have increased broker revenues
The majority of brokers use six lenders
The average broker loan size has increased significantly over the last five years
A majority of brokers had higher revenues in 2010 than in 2009
Refinancing as a proportion of broker business has picked up somewhat
Commissions have remained stable since the cuts in 2008
The major banks reduced commission levels in mid-2008
The most common average upfront commission is between 50 to 54 basis points
The most common average trail commission is between 15 to 19 basis points
Brokers have become more polarized regarding the structure of their commission schemes
Broker satisfaction with commission levels has dropped sharply since 2007
ANZ is regarded as having the best commission scheme, and CBA as having the worst
Commission scheme satisfaction and market share go hand in hand
ANZ has become the most commonly used and highly regarded lender
ANZ has become the most commonly used main lender
ANZ is regarded as the best lender by mortgage brokers
ANZ has leapfrogged the competition in the last few years when it comes to broker satisfaction
Brokers are the least satisfied with loan approval criteria, turnaround times, and commissions
Brokers see turnaround times as the most important area for lenders to improve
Brokers are cautiously optimistic, but commissions remain a concern
Most brokers expect commissions to remain stable in 2011
Most brokers expect business to improve in 2011
Although broker confidence has edged up since 2009, it is still a far cry from its heyday
Reduced commissions represent the greatest concern for mortgage brokers
Increased regulations have recently caused greater concern
Brokers believe the industry will consolidate and that lenders lack competition
OVERVIEW
Catalyst
Summary
HIGHER LOAN SIZES HAVE INCREASED BROKER REVENUES
Most brokers offer a range of mortgage products from several lenders
Most brokers offer mortgage packages
The majority of brokers use six lenders
The average broker loan size has increased over the last five years
The most common average loan size is now between $400,000 and $499,999
The average broker loan size has increased significantly over the last five years
Most brokers saw increased revenues in 2010
A majority of brokers had higher revenues in 2010 than in 2009
Broker business performance in 2010 sped up compared to 2008
Refinancing as a proportion of broker business has picked up somewhat
COMMISSIONS HAVE REMAINED STABLE SINCE THE CUTS IN 2008
Commission levels fell sharply in 2008 but have recently stabilized
The major banks reduced commission levels in mid-2008
The most common average upfront commission is between 50 to 54 basis points
Upfront commissions have been relatively stable since 2009
The most common average trail commission is between 15 to 19 basis points
Trail commissions have dropped over the last five years
Brokers have become more polarized regarding the structure of their commission schemes
Broker satisfaction with commission levels has plummeted
Broker satisfaction with commission levels has dropped sharply since 2007
ANZ is regarded as having the best commission scheme, and CBA as having the worst
Commission scheme satisfaction and market share go hand in hand
ANZ HAS BECOME THE MOST COMMONLY USED AND HIGHLY REGARDED LENDER
The major banks have a dominant share of broker business
ANZ has become the most commonly used main lender
Mortgage brokers preference for lenders has shifted over the last few years
Bank rankings have completely changed in the last few years
ANZ is regarded as the best lender by mortgage brokers
ANZ has leapfrogged the competition in the last few years when it comes to broker satisfaction
Turnaround times remain the most important area of improvement for lenders
Brokers are the least satisfied with loan approval criteria, turnaround times, and commissions
Brokers see turnaround times as the most important area for lenders to improve
Brokers see higher LVR options as the most important feature for their clients
BROKERS ARE CAUTIOUSLY OPTIMISTIC, BUT COMMISSIONS REMAIN A CONCERN
Brokers are optimistic revenues will increase in 2011
Most brokers expect commissions to remain stable in 2011
Most brokers expect business to improve in 2011
Although broker confidence has edged up since 2009, it is still a far cry from its heyday
Commission cuts and increased regulatory requirements concern brokers
Reduced commissions are the number one worry for mortgage brokers
Increased regulations have recently caused greater concern
Brokers believe the industry will consolidate, that lenders lack competition, and that fixed rates will remain unpopular
APPENDIX
Data tables
Methodology
Further reading
Ask the analyst
Datamonitor consulting
Disclaimer
