Fewer brokers to take bigger slice
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The next 12 months and beyond should be a bumper period for those brokers who remain in the industry, according to Australian Brokers exclusive aggregator poll.
Nine executives from large, mid-size and boutique aggregators were asked to predict channel growth and the impact of licensing on broker numbers in 2010 and the overwhelming consensus was that by year end, significantly fewer
Loankits Kym Rampal also forecast a 45% share for brokers as did PLAN Australia CEO Ray Hair.
Rampal said recent adjustments had left borrowers confused about which product and lender offers the best alternative, particularly when looking for a mix of products.
Brokers will also be able to take advantage of the re-emerging mortgage managers, which now offer well priced and flexible products as alternatives to the major lenders, he said.
Hair said the increase would be driven by an improved wholesale funding market contributing to competition and increased choice of lenders. In addition; while banks continue to shoot to themselves in the foot in a PR sense, consumers will continue to turn to and value the advice of brokers.
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brokers would be part of a bigger distribution channel (above 40%).
Channel size was forecast to be between 39% and 50% by end 2010 compared to Fujitsu Consulting estimates, which put broker originations at around 38% of all outstanding mortgages last year.
National Mortgage Brokers (nMB) managing director Gerald Foley was the most optimistic about channel growth, forecasting market share of between 45% and 50%.
Foley said the role and value of mortgage brokers had increased in recent times while the image of the banks particularly the majors has diminished through perceived opportunistic pricing, poor service and low community regard.
Foley added that while banks could offer the best pricing on products, brokers were best placed to provide borrowers with the best acquisition experience.
Aggregator poll: Part twoRead AB 7.02 for aggregators assessment of where securitisation and diversification is heading this year
Ballast Finance 39% 40%
National Mortgage Brokers
Loan Market 43%
Club Financial 40%
Predictions: Channel size by end of 2010
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CBA and MFAA clash over accreditation policiesThe CBA has refused to change its volume-based accreditation policy, despite mounting pressure from the MFAA.
Saying the bank required a reasonable sample to ascertain a brokers understanding of its products, credit policies and processes, Kathy Cummings, CBAs executive general manager for third party banking, defended its accreditation policy. She said it was in place to determine competency, not push volume.
Her comments follow the MFAA encouraging lenders to adopt quality rather than volume-based broker accreditation policies for its members, as it laid out in a proposal of what it deemed to be the requirements for a professional broker.
In an e-mail sent out to members late last year the industry organisation said its
national brokers committee (NBC) was concerned by some lender decisions to use volume as a broker accreditation yardstick.
And while it strongly endorsed the need for quality loan submissions, the MFAA said it believed it was inappropriate to use volume as a surrogate for quality.
Cummings felt that the MFAAs concerns were not valid, nor did she think the banks policies were inappropriate.
With the imminent introduction of national legislation the onus would fall on brokers to provide correct product and policy information to their customers, she said.
Therefore we have to make sure that whoever is selling that product is competent. To judge that competency we need to see it. The only way we can see it, is if they lodge loans with us, Cummings told AB.
St.George Bank general manager for intermediary distribution Steven Heavey said St.George assessed broker performance against a range of competencies including conversion ratio, arrears, loan book, run-off, errors, and rework.
The volume of business they write is irrelevant; it is all about being consistent enough with a lender in order to know their products, policy and process and therefore provide a quality service to their customer, Heavey said.
However, he said it would be difficult for a broker to write a quality-based proposal without the knowledge obtained through either using a lender frequently, or undergoing regular training.
What is more important than volume is that a broker avails themselves of all the details of their panel of lenders and uses those lenders enough to be able to provide the best product choice for their customer, he said.
Jeremy Fisher director at 1st Street Home Loans, who finished third in MPAs Top 100 broker survey, felt it would be challenging for lenders to measure quality above volume since volume is very easy to measure and in the end it relates directly back to profits.
Volume is a key measure of business for the lenders and they have understandably extended this measure to brokers, he said.
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The decision by the major banks to pass on different rate increases in December has resulted in a noticeable change in mortgage origination activity, according to Australian Finance Group.
Comments by Mark Hewitt, AFGs general manager of sales and operations in the Financial Review, suggest borrowers may be voting with their feet in response to recent rate increases.
Hewitt said new volume from NAB and ANZ were quite strong while Westpac volumes had come off a bit and CBA had maintained share.
Meanwhile, Loan Market Group chief operating officer Dean Rushton said more competition in the mortgage market would be of enormous benefit to homeowners with interest rates on the rise.
Ryan pointed out that the non-banks were playing a significant role in helping to keep the banks honest. We need to maintain the healthy competition otherwise were going to see more of the elevated increases that many homeowners experienced last year, he said.
According to Ryan, the non-bank sector was stronger than ever as a result of some of the majors opening wholesale channels, making funding options even more secure.
Non-banks take advantage of rates rises
and well and that it was helping to drive choice and competitive pricing. While there has been consolidation in the sector, brands like Resi Home Loans, Mortgage House, Homeloans Limited, Firs