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The Australian Mortgage Broker Survey 2009

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The Australian Mortgage Broker Survey 2009

Description:    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.

                Scope


                - Uses The Australian Mortgage Broker Survey 2009 to understand brokers thoughts of various
                mortgage issues and challenges.

                - Quantifies the size of the broker channel in the Australian mortgage market.

                - Uses The Australian Mortgage Broker Survey to understand how brokers feel about different
                aspects of their interaction with lenders.

                - Analyzes current trends in the broker channel.


                Highlights of this title

                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 The 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.

                Key reasons to purchase this title


                - Track important broker metrics such as loan size, refinancing proportion and product set.

                - Understand the impact of the global financial crisis on the mortgage broker channel, and the
                strategies that have evolved to mitigate this threat.

                - Perfect your strategy with The analysis, recommendations and forecasts.



Contents:       Overview
                Catalyst
                Summary
                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

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



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