The Australian Mortgage Broker Survey 2009

The mortgage broker channel has assumed an pivotal role in the distribution of residential mortgages in Australia. However, the global financial crisis has led some lenders to exit the market and others to cut back on the broker channel. This report looks at how the mortgage broker channel is changing and focuses on issues and challenges faced by brokers.

Report Highlights
The global credit crisis has adversely affected all participants in the mortgage industry. Prospective mortgagors are more wary about committing to a mortgage and lenders are finding it harder to source funds. Total housing lending commitments have fallen by almost 15% in the last year, from A$264 billion in 2007 to A$225 billion in 2008.

In 2009, an impressive 70% of mortgage brokers mentioned CBA as one of their top three lenders. The resurging dominance of the major banks in the mortgage market can be seen for the other banks as well. Westpac was mentioned by 19% of respondents as a top three lender in 2006, a figure which had grown to 46% by 2009.

It is Datamonitor's view that regulations will have a relatively minor impact on the mortgage broker industry, for several reasons. Firstly, these changes have been anticipated for several years, and brokers have had time to prepare for them. Secondly, most brokers already comply with most of the requirements of the proposed regulations.
[Studien Infos ausblenden]

Table of Contents 8
Table of figures 9
Table of tables 10
Market Context 11
The mortgage market is in a state of flux 11
Mortgage brokers have contributed to increasing competition in the Australian mortgage market 11
Mortgage brokers have recently been adversely affected by the global credit crisis 11
Non-bank lenders account for a falling proportion of lending commitments 12
The growth in refinancing has leveled out 14
Outstanding mortgages show steady growth but securitized loans have declined rapidly 15
Consolidation has occurred on all levels of the mortgage industry 17
Australian housing affordability is low 18
Property prices have recently declined slightly but are still high by historical standards 18
Australians have become much more leveraged over the last 10 years 20
Mortgage stress has become more common, especially for some groups of mortgagors 21
Overseas mortgage brokers have been hit even harder than Australian brokers 22
Mortgage Broker Metrics 24
Mortgage brokers have become more diversified 24
Mortgage brokers now offer a wide range of mortgage products 24
Mortgage brokers commonly offer other products besides mortgages 25
Average loan size has been increasing 26
Refinancing has become less important for mortgage brokers 27
Mortgage brokers have become less optimistic 28
Mortgage brokers saw a decline in business in 2008 28
Mortgage brokers have become a lot less optimistic regarding business expectations since 2007 29
Most brokers expect refinancing to be stable in 2009 30
Mortgage Brokers and Lenders 33
The major Australian banks have achieved a dominant position 33
Most mortgage brokers regard CBA as one of their top three lenders 33
CBA provides the best service to brokers 34
The major banks account for most outstanding ADI mortgages 35
Turnaround times and commissions frustrate mortgage brokers 36
Mortgage brokers are generally satisfied with lender product range and BDM support 36
Mortgage brokers are relatively dissatisfied with the speed of lending decisions 38
Satisfaction with the speed of lending decisions has decreased 39
Brokers see turnaround times as the most important area of improvement for lenders 41
ING Direct, ANZ and CBA had the best turnaround times in 2008 according to brokers 43
Mortgage broker clients prioritize rates, turnaround times and flexibility according to brokers 43
Mortgage Brokers and Commissions 45
The major banks reduced commission levels in mid-2008 45
Westpac announced commission cuts in April 2008 45
St.George instituted performance targets tied to commissions in May 2008 45
NAB announced changes to its commission structure in May 2008 46
CBA announced commission cuts in May 2008 46
ANZ announced commission cuts in June 2008 46
Average broker commission levels have decreased sharply 46
Upfront commissions have decreased 47
Trail commissions have decreased 48
Commissions are expected to continue to decrease 48
Mortgage brokers are pressured by lower commission levels but have no recourse 49
Brokers are not very happy about current commission levels 49
St.George has the best commission scheme according to mortgage brokers 51
NAB has the worst commission scheme according to mortgage brokers 52
Brokers would like higher trail commissions at the expense of upfront commissions 53
The Attitudes of Mortgage Brokers 55
Lenders abandoning the broker channel have become a much bigger concern for brokers 55
Commission cuts constitute the biggest concern for brokers 55
Lenders abandoning the broker channel have become a bigger concern 56
Overseas mortgage brokers share Australian brokers' concerns about distribution channels 57
Most brokers are unconcerned about the effects of federal regulation 58
Mortgage brokers feel threatened by the financial crisis and exit of non-bank lenders 59
Brokers feel that the absence of non-bank lenders lowers competition in the market 59
Most surveyed brokers think that customers will continue using brokers 60
Future Focus 62
Consolidation, diversification and specialization will continue 62
Consolidation will leave a small number of major broker companies with the majority of broker business 62
Mortgage broker consolidation will continue in 2009 62
Consolidation may benefit public perception of brokers 63
Diversification offers alternative revenue streams 63
Some brokers will narrowly specialize on a niche market 64
Regulation and fee-for-service models are not expected to have a large impact 64
Regulations may have a slight beneficial effect on the mortgage broker industry 64
The fee-for-service model is not expected to thrive 65
The current situation offers some opportunities for market participants 66
Broker strategies are currently focused on survival 66
The current situation offers opportunities for lenders with foresight 66
A mature mortgage market offers several important benefits 67
APPENDIX 68
Data tables 68
Definitions 87
Clawback 87
Lending commitments 87
Low-documentation loan 87
Mortgage package 87
Non-bank lender 87
Non-conforming loan 87
Refinancing 88
Trail commission 88
Methodology 88
Further reading 88
Ask the analyst 88
Datamonitor consulting 88
Disclaimer 88
[Inhaltsverzeichnis ausblenden]

Table 1: Three main threats cause three different levels of concern for brokers 5
Table 2: Three main threats cause three different levels of concern for brokers 56
Table 3: Broker-mediated lending commitments and other lending commitments, 1999-2008 68
Table 4: Monthly owner occupier lending commitments by institution type, Jan 1999-Jun 2005 69
Table 5: Monthly owner occupier lending commitments by institution type (continued), Jul 05-Dec 08 70
Table 6: Refinancing lending commitments and proportion of owner occupier lending commitments, 1999-2008 71
Table 7: Outstanding mortgages and securitized outstanding mortgages, Dec 03-Sep 08 72
Table 8: Price index of established homes using a weighted average of the eight capital cities, Mar 02-Dec 08 73
Table 9: Housing interest payments to disposable income ratio, Mar 1999-Sep 2008 74
Table 10: Cash rate target, Jan 1999-Feb 2009 75
Table 11: I feel financial stress about my mortgage situation, Dec 07 76
Table 12: By how much have you seen new lending in the following mortgage sectors fall in 2008? (UK mortgage intermediaries) 76
Table 13: What other products do you offer, or consider offering? 76
Table 14: What mortgage products do you currently sell? 77
Table 15: What is your average loan size? 77
Table 16: What proportion of the value of your business was based on refinancing last year? 77
Table 17: How did your business perform in 2008 compared to 2007? 78
Table 18: How do you expect your mortgage business to perform this year? 78
Table 19: Do you expect any changes in the level of refinancing this year? 78
Table 20: Proportion that would use a mortgage broker if arranging mortgage, Dec 07 79
Table 21: Which three lenders do you most commonly use? 79
Table 22: Which lender provides the best all-round service to brokers? 79
Table 23: Outstanding mortgages by institution and proportion of all ADI outstanding mortgages, Jan 09 80
Table 24: How do you rate the attributes of the main lender that you deal with? 80
Table 25: How do you rate the attributes of the main lender that you deal with? (continued) 80
Table 26: How do you rate the attributes of the main lender that you deal with? 81
Table 27: How do you rate the attributes of the main lender that you deal with? 81
Table 28: Please specify areas of improvement for lenders 82
Table 29: Score for approval/loan turnaround times in MPA survey 82
Table 30: In order of importance, please can you rank the top three features from your clients' perspective? 83
Table 31: What is your average upfront commission? 83
Table 32: What is your average trail commission rate? 83
Table 33: How satisfied are you with your current commission levels? 84
Table 34: Who has the best commission scheme in your view? 84
Table 35: Who has the worst commission scheme in your view? 84
Table 36: Do you expect commissions to increase, decrease or stay the same in the next 12 months? 85
Table 37: If you could change your commission structure which of the following would you choose? 85
Table 38: Which of the following issues are you most concerned about? (UK mortgage intermediaries) 85
Table 39: How concerned are you about the following? 86
Table 40: Please rate the following attitude statements 86
Table 41: Please rate the following attitude statements 87
Figure 1: Mortgage brokers are dissatisfied with the speed of lending decisions of their main lender 4
Figure 2: Housing lending commitments have fallen in 2008, 1999-2008 12
Figure 3: Non-bank lenders account for a falling share of owner occupier lending commitments, 1999-2008 13
Figure 4: Mortgage brokers think that the decline of non-bank lenders lowers competition in the market 14
Figure 5: Refinancing lending commitments have leveled off, 1999-2008 15
Figure 6: Outstanding mortgages have grown steadily in Australia, 2003-2008 16
Figure 7: Securitized loans have declined, 2003-2008 17
Figure 8: Broker opinions are divided when it comes to consolidation 18
Figure 9: The ABS price index of established homes has recently declined, 2002-2008 19
Figure 10: The ratio of housing interest payments to disposable income has increased, 1999-2008 20
Figure 11: The cash rate target has recently been lowered, 1999-2009 21
Figure 12: Mortgage stress is more common among some mortgagor groups 22
Figure 13: Mortgage intermediaries in the UK have seen decreasing loan volumes in 2008 23
Figure 14: Mortgage brokers in Australia offer a wide range of products 24
Figure 15: Mortgage brokers offer other products besides mortgages 26
Figure 16: Mortgage broker loan size has increased 27
Figure 17: Refinancing has become less important for mortgage brokers 28
Figure 18: Many mortgage brokers experienced falling business volumes in 2008 29
Figure 19: Mortgage brokers are currently less optimistic about future revenues 30
Figure 20: Most mortgage brokers expect refinancing levels to stay similar in 2009 31
Figure 21: Mortgagors who previously used brokers are more likely to do so again 32
Figure 22: CBA is mentioned by 70% of brokers as a top three lender 34
Figure 23: CBA and St.George are the most highly regarded lenders when it comes to service 35
Figure 24: The major banks dominate outstanding ADI mortgages 36
Figure 25: Most brokers are satisfied with their main lender's product range 37
Figure 26: Mortgage brokers are dissatisfied with the speed of lending decisions of their main lender 39
Figure 27: Brokers have become less satisfied with commissions and the speed of lending decisions 40
Figure 28: Dissatisfaction with the speed of lending decisions has increased 41
Figure 29: Brokers see turnaround times as the most important area of improvement for lenders 42
Figure 30: ING had the best turnaround times in 2008 according to brokers 43
Figure 31: Rate is a top priority for brokers' clients 44
Figure 32: Upfront commissions have decreased 47
Figure 33: Trail commissions have decreased 48
Figure 34: Brokers expect commissions to fall further 49
Figure 35: Brokers are dissatisfied with current commission levels 50
Figure 36: Brokers have become much more dissatisfied with commission levels 51
Figure 37: St.George has the best commission scheme 52
Figure 38: NAB has the worst commission scheme 53
Figure 39: Brokers would like higher trail commissions at the expense of upfront commissions 54
Figure 40: Commission cuts constitute the biggest concern for brokers 55
Figure 41: More brokers are concerned that lenders may abandon the broker distribution channel 57
Figure 42: UK mortgage intermediaries are concerned about lenders abandoning broker distribution 58
Figure 43: Brokers are relatively unconcerned about the effects of federal regulation 59
Figure 44: Brokers feel that the absence of non-bank lenders lowers competition in the market 60
Figure 45: Brokers think that mortgage customers will continue using brokers 61
[Tabellenverzeichnis ausblenden]