Industry reform, more stringent credit criteria, and the cyclical nature of the property market have all been a core part of the financial services narrative over the past year – and the challenges that home buyers and investors are facing in light of these events has ensured that mortgage brokers are busier than ever before.
The royal commission is due to release its findings in early 2019, bringing a 13-month inquiry to a close with a final report including policy recommendations, and the first phase of open banking in July is set to make it easier for customers to switch their financial services provider.
Both of these milestones support a move towards greater transparency throughout the industry and should deliver huge customer benefits in the long term. These shifting tides also provide an opportunity for brokers to reassess their brand positioning and adapt their value proposition to better support the customer journey going forward.
With lending criteria becoming more stringent in recent months, there’s no escaping the fact that it’s harder for buyers to secure a home loan. This is particularly true for investors, who are challenged with paying an extra 60 basis points if they want to maintain their interest only mortgage when refinancing.
CoreLogic data shows investor loans have dropped by 10 per cent over the past year to now make up only 15 per cent of all broker written loans – clear evidence of a reduced appetite for investor lending. In this tighter regulatory environment, many brokers are recognising just how important it is to do their research, understand lending requirements and build relationships with finance providers so they can get the right result for their clients.
The lending market is however expanding, with an influx of non-deposit taking institutions providing brokers with a welcome alternative to the Big Four banks. This cohort has gained market share over the past 12 months and now makes up 10 per cent of loans written by brokers, up from 2.5 per cent on the year before. It’s not mainstream business just yet, but brokers may well be more likely to consider these lenders next year as their nimble approach to decision making could provide welcome relief for mortgage customers.
Data will of course be a hot topic for 2019 thanks to open banking reform. In addition to bank data brokers can also leverage data sources such as valuation platforms and regional property reports to enhance their credibility as a trusted adviser.
While clients are becoming more knowledgeable due to the abundance of publicly available data, brokers can provide additional value by using their industry insights to tailor advice when steering their clients through the home loan journey – particularly as growing ambiguity and regulatory change makes it increasingly difficult to navigate successfully.
Cross-industry collaboration has really picked up steam this year following the Sedgwick Review and ASIC Remuneration Review, with the recently launched Combined Industry Forum (CIF) pulling together a host of financial services representatives to propel the broker industry into the next phase of its evolution.
Governance and customer centricity are high on the reform agenda, and adopting a collaborative approach could prove valuable for brokers in terms of getting advice and support to effect positive change.
It’s no surprise that these defining elements of 2018 have created a broker landscape very different now to what it was a year ago.
Take the opportunity to reassess your service offering and set the bar high for best practice now and you will secure your reputation as a trusted adviser for your clients in future.