After a flat few years in the post-GFC environment, where the broker sector receded by -0.2 percent as a result of house prices in the doldrums and low credit volumes, market research company IbisWorld predicts annual growth will rebound at 5.3 percent over the next five years.
FY2013/2014 growth of 4.9 percent has the industry pegged at $1.5 billion, forecast to reach $1.9 billion in FY2018/2019 among the industry’s 5,740 businesses.
But with all this positive growth, the researchers suggest competition will increase as more lenders and brokers enter the market, and brokers are increasingly looked to as an unbiased source of advice and support for clients.
It begs the question: for how long will customers view the broker industry as unbiased? The media spotlight has been turned on the industry in recent months to demonstrate for consumers the lines of ownership behind the major players and the big four’s tactics to secure themselves a larger slice of the broker pie.
For example, back in March, it did not escape media attention that Westpac offered extra incentives to brokers who achieved the bank’s volume targets. A windfall for the brokers; not so much for the customer.
These moves by the big four to flex their muscles among aggregator partners don’t do the credibility of the finance industry any favours. More than ever, customers have information at their fingertips and are happy, keen even, to do their own research when it comes to choosing who they will give their business to.
Interest rates are the lowest they’ve been in generations and the big banks have chosen not to compete on price, other than with each other. They could slug it out for market share by offering the best deals to enable customers to save money on their home loan.
But they don’t. Instead, what they are doing is enticing the broker, the expert the customer may rely on as a guide in a field full of pitfalls for the uninitiated, to show preference to their product – one which otherwise may have little going for it in a finance market with blood in the streets.
It’s not so much a reflection on the brokers – there are many excellent brokers whose reputations rest upon years of credible service provided to a loyal customer base and compounded by personal referrals.
It is a commentary on the cynicism of the banks, their willingness to muddy the waters. It is a mercenary approach to buy off the middle man and skew the playing field instead of being a legitimate market force by offering the customer a strong value proposition for their home loan.
If the big four want to increase their market share, they should do it by offering a better product to allow the customer to make a valid comparison and not compromise the credibility of the mortgage broking industry.
Kim is founder and Managing Director of Firstmac Limited. He has been in the Australian finance industry for the past 30 years, and has owned a number of different companies and brands in that time. Kim was there at the start of the non-bank lending industry in Australia and was one of the leaders that challenged the banking industry at the time and made home loans more competitive for every day consumers.