Deloitte have championed the value of the broker, following the release of two significant reports this month that highlight the economic and consumer impact of brokerage in today’s climate.
The Value of Mortgage Broking, a report derived from surveying 1,635 mortgage brokers, highlighted access to diverse product options as a broker’s strong value-add for consumers. In 2016 to 2017, brokers generally offered “products from 34 different lenders”, and would, on average, use “10 different lenders” to meet the diverse needs of their clients. This remains a favourable service offering in contrast to borrowers dealing directly with lenders whereby products presented are typically limited.
Additionally, it seems the modern broker’s counsel serves as an educational process, thus, empowering to consumers, with over a quarter revealing they would “consider doing the entire application process online in future having had a broker educate them about mortgage options”.
That said, 62% of consumers still value traditional interactions throughout the broker-customer journey, such as “face-to-face, phone, and mail”, in spite of technology advancement.
The broker’s continually upheld value in helping consumers navigate complexities derived from a vastly changing and hyper-competitive marketplace was reinforced throughout the report. Again, the notion of the time-poor consumer is a frequent segment in need of brokerage, along with those “whose financial circumstances make it more difficult to secure a loan.”
Moreover, accessibility was a significant theme amongst customers in rural and regional markets who leverage the broker’s capability in the face of geographical constraints that limit access to physical branches.
Industry Thought Leaders Champion The Modern Broker
Deloitte also put out their Australian Mortgage Report this month, which stemmed from both a survey and roundtable held with some of the industry’s biggest thought leaders.
Attendees spanned department heads and c-level from the likes of HSBC, Suncorp, Westpac and Liberty Financial – to name a few.
When asked to rank where consumers were sourcing their influence from when considering mortgage products, roundtable participants positioned family and friends as the highest, with mortgage brokers as second, followed by social media, traditional banks and the media in general.
While borrowers fumble through industry changes and media scrutiny amid the Royal Commission into industry conduct, the roundtable panel found consumers “significantly” and “somewhat” more informed and knowledgeable about mortgage product choices and pricing compared to five years ago.
With that in mind, the broker as an advocate for efficient process and stakeholder management is still a highly valued and sought-after component of the buyer’s journey, a factor that Deloitte’s James Hickey attributes to “the fluidity of changes to pricing features and assessment criteria of lenders”.
Westpac’s Nathan McMullen believes service to be a strong driving force, “I believe consumers are somewhat more informed about product choices and pricing”, adding, “I think price and product will only get you so far. You still need to be strong in providing a very good service experience.”
The Broker’s Role in Navigating Regulatory Changes
Roundtable participants were asked to comment on the biggest concerns for the mortgage market in 2018. APRA’s changes to interest-only lending and its subsequent impact on borrowers featured heavily.
“I agree with the regulator in principle. Intrinsically it has to be a ‘sheep dip’ approach – a very blunt speed bump”, says roundtable attendee, Lisa Claes, from CoreLogic. That said, Claes is concerned with how it will impact the individual investor who falls outside the capped quota for refinancing renewal, “to me that doesn’t make sense.”
Police Bank’s, Tony Taylor, shares the feeling of uncertainty amid APRA’s crackdown, “if you go from interest only to P&I (Principal and Interest), it’s potentially up to a 40-50% increase in the servicing costs. In two years to three years out, there will be quite a different outlook from what’s there now.”
In addition to educating the consumer on diverse products, pre-empting the impact of interest-only changes is one of many nuanced areas of troubleshooting that consumers are less likely to navigate alone.
The ‘Customer In Control’ Future
Deloitte Partner, Heather Baister, noted significant growth in the first home buyers segment, which increased from 10% to 20% in the three years leading up to 2018. Baister thinks Gen Ys coming into the market are savvier than ever and inclined to “see their data far more as their asset to bargain with”, compared to Gen X’s and Baby Boomers.
Further, Baister points out that Millennials will typically “go to social media to sound things out”, but ultimately it’s the broker who takes “the hassle factor out” once they have perhaps been recommended via their trusted networks.
All this in mind, it’s no time for brokers to get complacent, rather – to step up Baister infers, “most brokers bank on their experience and the products they know, primarily from five or six lenders. So the question is how do you actually open up the offerings of the smaller lenders in the industry that might be more suitable in many ways? Or even a different proposition?”
As the report’s sub-title states, the ‘customer in control’ model envisages a consumer-led future in the way of lending, but as these insights highlight, it will be the broker with a fluid and customer-centric proposition that will ultimately help consumers become savvier at building wealth through property.