Conversions down, commercial up: The current state of broking

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    • 2018 Commercial Lenders Roundtable
    • Top 10 Brokerages 2018
    • 2018 Brokers on Aggregators

    The MFAA’s Industry Intelligence Service Report, now in its six edition, compiles performance and demographics data from thirteen aggregators over a six-month period. While this year there was one less aggregator involved, the data provides a glimpse into the changes, challenges and successes brokers are facing. This report covers the period from 1 October 2017 to 31 March 2018.

    Here are five key takeaways.

    The average value of loans per broker is down.
    Over the last five six-month periods, the net decline has been 15.8%, from $6.9m to $5.8m per broker. The report said this was reflective of the contracting lending environment and the drop in the overall broker population (although one less aggregator was involved this year). But it also noted that the rate of decline has been slowing over the last three periods. While value is down, the actual number of loans per broker has remained steady since the last survey.

    Conversion rates are the lowest they’ve been in five years.
    Brokers are converting 72.1% of loan applications to settlements, a decrease of 3.6 percentage points from the last survey. “This could indicate that brokers may still be adjusting to lender assessment criteria, or as other data suggests, they are submitting business to a wider range of lenders,” the report said.

    Female brokers are leaving the industry.
    The proportion of women in the broking industry is down slightly since the last survey from 28.3% to 27.1%. There are now 92 fewer women in the industry compared to the last period; the first time the female population has declined in absolute terms since reporting began.

    Brokers are diversifying.
    The number of residential mortgage brokers who are also selling commercial finance products has more than doubled in the last two years. The number increased by 124% from 1,641 brokers in 2016 to 3,668 brokers during this period.

    The value of commercial loan settlements has also increased to just under $9bn. “This suggests that residential mortgage brokers appreciate the importance of diversification as a means of growing their business, or insulating their businesses from industry change or market corrections,” the report said.

    The major banks are continuing to lose broker market share.
    (Statistics for this category were released in advance for the April-to-June 2018.)

    The report showed that brokers are increasingly choosing to use non-major banks and other lenders. Their market share grew to 32.7% during this period, up from 21.4% more than four years ago. On the other hand, the major banks recorded their lowest level of broker loan flows, at 45.7%, down from 58.5% in 2018.

    Original Article