Table of Contents
OVERVIEW
EXECUTIVE SUMMARY
- Market context
- The mortgage market is in a state of flux
- The Australian property market is uncertain
- Mortgage broker metrics
- Refinancing has become less important for mortgage brokers
- Mortgage brokers saw a decline in business in 2008
- Mortgage brokers have become a lot less optimistic regarding business
expectations since 2007
- Mortgage brokers and lenders
- The major Australian banks have achieved a dominant position
- CBA provides the best service to brokers
- Turnaround times and commissions frustrate mortgage brokers
- Mortgage brokers and commissions
- The major banks reduced commission levels in mid-2008
- Average broker commission levels have decreased sharply
- The attitudes of mortgage brokers
- Lenders abandoning the broker channel has become a bigger concern
- Most brokers are unconcerned about the effects of federal regulation
- Future focus
- Consolidation, diversification and specialization will continue
- Regulation and fee-for-service models are not expected to have a large
impact
- The current situation offers some opportunities for market participants
MARKET CONTEXT
- The mortgage market is in a state of flux
- Mortgage brokers have contributed to increasing competition in the
Australian mortgage market
- Mortgage brokers have recently been adversely affected by the global
credit crisis
- Non-bank lenders account for a falling proportion of lending commitments
- The growth in refinancing has leveled out
- Outstanding mortgages show steady growth but securitized loans have
declined rapidly
- Consolidation has occurred on all levels of the mortgage industry
- Australian housing affordability is low
- Property prices have recently declined slightly but are still high by
historical standards
- Australians have become much more leveraged over the last 10 years
- Mortgage stress has become more common, especially for some groups of
mortgagors
- Overseas mortgage brokers have been hit even harder than Australian
brokers
MORTGAGE BROKER METRICS
- Mortgage brokers have become more diversified
- Mortgage brokers now offer a wide range of mortgage products
- Mortgage brokers commonly offer other products besides mortgages
- Average loan size has been increasing
- Refinancing has become less important for mortgage brokers
- Mortgage brokers have become less optimistic
- Mortgage brokers saw a decline in business in 2008
- Mortgage brokers have become a lot less optimistic regarding business
expectations since 2007
- Most brokers expect refinancing to be stable in 2009
MORTGAGE BROKERS AND LENDERS
- The major Australian banks have achieved a dominant position
- Most mortgage brokers regard CBA as one of their top three lenders
- CBA provides the best service to brokers
- The major banks account for most outstanding ADI mortgages
- Turnaround times and commissions frustrate mortgage brokers
- Mortgage brokers are generally satisfied with lender product range and
BDM support
- Mortgage brokers are relatively dissatisfied with the speed of lending
decisions
- Satisfaction with the speed of lending decisions has decreased
- Brokers see turnaround times as the most important area of improvement
for lenders
- ING Direct, ANZ and CBA had the best turnaround times in 2008 according
to brokers
- Mortgage broker clients prioritize rates, turnaround times and
flexibility according to brokers
MORTGAGE BROKERS AND COMMISSIONS
- The major banks reduced commission levels in mid-2008
- Westpac announced commission cuts in April 2008
- St.George instituted performance targets tied to commissions in May 2008
- NAB announced changes to its commission structure in May 2008
- CBA announced commission cuts in May 2008
- ANZ announced commission cuts in June 2008
- Average broker commission levels have decreased sharply
- Upfront commissions have decreased
- Trail commissions have decreased
- Commissions are expected to continue to decrease
- Mortgage brokers are pressured by lower commission levels but have no
recourse
- Brokers are not very happy about current commission levels
- St.George has the best commission scheme according to mortgage brokers
- NAB has the worst commission scheme according to mortgage brokers
- Brokers would like higher trail commissions at the expense of upfront
commissions
THE ATTITUDES OF MORTGAGE BROKERS
- Lenders abandoning the broker channel have become a much bigger concern
for brokers
- Commission cuts constitute the biggest concern for brokers
- Lenders abandoning the broker channel have become a bigger concern
- Overseas mortgage brokers share Australian brokers' concerns about
distribution channels
- Most brokers are unconcerned about the effects of federal regulation
- Mortgage brokers feel threatened by the financial crisis and exit of
non-bank lenders
- Brokers feel that the absence of non-bank lenders lowers competition in
the market
- Most surveyed brokers think that customers will continue using brokers
FUTURE FOCUS
- Consolidation, diversification and specialization will continue
- Consolidation will leave a small number of major broker companies with
the majority of broker business
- Diversification offers alternative revenue streams
- Some brokers will narrowly specialize on a niche market
- Regulation and fee-for-service models are not expected to have a large
impact
- Regulations may have a slight beneficial effect on the mortgage broker
industry
- The fee-for-service model is not expected to thrive
- The current situation offers some opportunities for market participants
- Broker strategies are currently focused on survival
- The current situation offers opportunities for lenders with foresight
- A mature mortgage market offers several important benefits
APPENDIX
- Data tables
- Definitions
- Clawback
- Lending commitments
- Low-documentation loan
- Mortgage package
- Non-bank lender
- Non-conforming loan
- Refinancing
- Trail commission
- Methodology
- Further reading
- Ask the analyst
- Datamonitor consulting
- Disclaimer
TABLES
- Table: Three main threats cause three different levels of concern for
brokers
- Table: Three main threats cause three different levels of concern for
brokers
- Table: Broker-mediated lending commitments and other lending commitments,
1999 - 2008
- Table: Monthly owner occupier lending commitments by institution type, Jan
1999 - Jun 2005
- Table: Monthly owner occupier lending commitments by institution type
(continued), Jul 05 - Dec 08
- Table: Refinancing lending commitments and proportion of owner occupier
lending commitments, 1999 - 2008
- Table: Outstanding mortgages and securitized outstanding mortgages, Dec 03
- Sep 08
- Table: Price index of established homes using a weighted average of the
eight capital cities, Mar 02 - Dec 08
- Table: Housing interest payments to disposable income ratio, Mar 1999 -
Sep 2008
- Table: Cash rate target, Jan 1999 - Feb 2009
- Table: I feel financial stress about my mortgage situation, Dec 07
- Table: By how much have you seen new lending in the following mortgage
sectors fall in 2008? (UK mortgage intermediaries)
- Table: What other products do you offer, or consider offering?
- Table: What mortgage products do you currently sell?
- Table: What is your average loan size?
- Table: What proportion of the value of your business was based on
refinancing last year?
- Table: How did your business perform in 2008 compared to 2007?
- Table: How do you expect your mortgage business to perform this year?
- Table: Do you expect any changes in the level of refinancing this year?
- Table: Proportion that would use a mortgage broker if arranging mortgage,
Dec 07
- Table: Which three lenders do you most commonly use?
- Table: Which lender provides the best all-round service to brokers?
- Table: Outstanding mortgages by institution and proportion of all ADI
outstanding mortgages, Jan 09
- Table: How do you rate the attributes of the main lender that you deal
with?
- Table: How do you rate the attributes of the main lender that you deal
with? (continued)
- Table: How do you rate the attributes of the main lender that you deal
with?
- Table: How do you rate the attributes of the main lender that you deal
with?
- Table: Please specify areas of improvement for lenders
- Table: Score for approval/loan turnaround times in MPA survey
- Table: In order of importance, please can you rank the top three features
from your clients' perspective?
- Table: What is your average upfront commission?
- Table: What is your average trail commission rate?
- Table: How satisfied are you with your current commission levels?
- Table: Who has the best commission scheme in your view?
- Table: Who has the worst commission scheme in your view?
- Table: Do you expect commissions to increase, decrease or stay the same in
the next 12 months?
- Table: If you could change your commission structure which of the
following would you choose?
- Table: Which of the following issues are you most concerned about? (UK
mortgage intermediaries)
- Table: How concerned are you about the following?
- Table: Please rate the following attitude statements
- Table: Please rate the following attitude statements
FIGURES
- Figure: Mortgage brokers are dissatisfied with the speed of lending
decisions of their main lender
- Figure: Housing lending commitments have fallen in 2008, 1999 - 2008
- Figure: Non-bank lenders account for a falling share of owner occupier
lending commitments, 1999 - 2008
- Figure: Mortgage brokers think that the decline of non-bank lenders lowers
competition in the market
- Figure: Refinancing lending commitments have leveled off, 1999 - 2008
- Figure: Outstanding mortgages have grown steadily in Australia, 2003 - 2008
- Figure: Securitized loans have declined, 2003 - 2008
- Figure: Broker opinions are divided when it comes to consolidation
- Figure: The ABS price index of established homes has recently declined,
2002 - 2008
- Figure: The ratio of housing interest payments to disposable income has
increased, 1999 - 2008
- Figure: The cash rate target has recently been lowered, 1999 - 2009
- Figure: Mortgage stress is more common among some mortgagor groups
- Figure: Mortgage intermediaries in the UK have seen decreasing loan
volumes in 2008
- Figure: Mortgage brokers in Australia offer a wide range of products
- Figure: Mortgage brokers offer other products besides mortgages
- Figure: Mortgage broker loan size has increased
- Figure: Refinancing has become less important for mortgage brokers
- Figure: Many mortgage brokers experienced falling business volumes in 2008
- Figure: Mortgage brokers are currently less optimistic about future
revenues
- Figure: Most mortgage brokers expect refinancing levels to stay similar in
2009
- Figure: Mortgagors who previously used brokers are more likely to do so
again
- Figure: CBA is mentioned by 70% of brokers as a top three lender
- Figure: CBA and St.George are the most highly regarded lenders when it
comes to service
- Figure: The major banks dominate outstanding ADI mortgages
- Figure: Most brokers are satisfied with their main lender' s product range
- Figure: Mortgage brokers are dissatisfied with the speed of lending
decisions of their main lender
- Figure: Brokers have become less satisfied with commissions and the speed
of lending decisions
- Figure: Dissatisfaction with the speed of lending decisions has increased
- Figure: Brokers see turnaround times as the most important area of
improvement for lenders
- Figure: ING had the best turnaround times in 2008 according to brokers
- Figure: Rate is a top priority for brokers' clients
- Figure: Upfront commissions have decreased
- Figure: Trail commissions have decreased
- Figure: Brokers expect commissions to fall further
- Figure: Brokers are dissatisfied with current commission levels
- Figure: Brokers have become much more dissatisfied with commission levels
- Figure: St.George has the best commission scheme
- Figure: NAB has the worst commission scheme
- Figure: Brokers would like higher trail commissions at the expense of
upfront commissions
- Figure: Commission cuts constitute the biggest concern for brokers
- Figure: More brokers are concerned that lenders may abandon the broker
distribution channel
- Figure: UK mortgage intermediaries are concerned about lenders abandoning
broker distribution
- Figure: Brokers are relatively unconcerned about the effects of federal
regulation
- Figure: Brokers feel that the absence of non-bank lenders lowers
competition in the market
- Figure: Brokers think that mortgage customers will continue using brokers
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