Mortgage brokers could double their share of housing loans with the biggest winners likely to be the industry’s big players such as Perth-based Australian Finance Group, a conference in Perth was told last week.
Mortgage brokers could double their share of housing loans with the biggest winners likely to be the industry’s big players such as Perth-based Australian Finance Group, a conference in Perth was told last week.
Brokers currently accounted for 36 per cent of all housing loans in Australia, Fujitsu Consulting general manager Martin North told the Mortgage Industry Association of Australia’s annual conference.
He predicted the brokers would lift their market share even higher.
“It’s absolutely possible that we will see up to 65 per cent of loans coming through the broker channel,” he said.
Mr North also predicted the sector would be increasingly dominated by a small number of large players, including AFG and FAST, which were effectively wholesalers, and Mortgage Choice, which also operated at a retail level.
AFG managing director Brett McKeon said the 2,500 contracted brokers operating through his firm accounted for nearly nine per cent of all housing loans in Australia.
He estimated that brokers held about 40 per cent market share and predicted they would reach 50 per cent, but acknowledged that banks were investing more in their own distribution channels.
“Each percentage point that we gain is a lot more difficult than it was two to three years ago,” Mr McKeon said.
He confirmed that AFG was still working towards an initial public offering in mid 2007, where it could raise up top $50 million in fresh capital.
Macquarie Bank divisional director William Ammentorp, who also spoke at the MIAA conference, provided a different perspective on the industry’s growth.
He reaffirmed Macquarie’s view that brokers’ share of housing loans provided by banks was likely to stay around 30 per cent.
Mr Ammentorp said there was a lot of confusion because many loans originated by brokers were funded by mortgage managers such as Aussie, Rams and Wizard.
While Mr North was very bullish on brokers’ market share, he also expected their commi-ssions would come under pressure.
This was based on research showing that about 30 per cent of loans – typically those with longer duration and higher margins – contributed nearly 100 per cent of profit to the lenders.
He said lenders would be keen to realign broker payments with customer profits, and predicted that commission payments would be cut and trail commissions dropped by at least some lenders.
This would present a major challenge for the industry, since commission payments were by far the most important factor used by brokers to select lenders.
Sixty per cent of brokers said up-front commission was the main criterion.
Other criteria named by brokers were speed of decision-making (55 per cent) and trailing commissions (40 per cent).
Notably, bank brand was named by only 10 per cent of brokers.
