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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 lender Figure Figure Figure Figure Figure Figure Figure Figure Figure Figure Figure Figure Figure Figure Figure Figure Figure Figure Figure
26: Mortgage brokers are dissatisfied with the speed of lending decisions of their main 27: 28: 29: 30: 31: 32: 33: 34: 35: 36: 37: 38: 39: 40: 41: 42: 43: 44: 45: Brokers have become less satisfied with commissions and the speed of lending decisions Dissatisfaction with the speed of lending decisions has increased Brokers see turnaround times as the most important area of improvement for lenders ING had the best turnaround times in 2008 according to brokers Rate is a top priority for brokers clients Upfront commissions have decreased Trail commissions have decreased Brokers expect commissions to fall further Brokers are dissatisfied with current commission levels Brokers have become much more dissatisfied with commission levels St.George has the best commission scheme NAB has the worst commission scheme Brokers would like higher trail commissions at the expense of upfront commissions Commission cuts constitute the biggest concern for brokers More brokers are concerned that lenders may abandon the broker distribution channel UK mortgage intermediaries are concerned about lenders abandoning broker distribution Brokers are relatively unconcerned about the effects of federal regulation Brokers feel that the absence of non-bank lenders lowers competition in the market Brokers think that mortgage customers will continue using brokers
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