Mortgage brokers have strengthened their position as the dominant channel for arranging residential finance, with brokers facilitating a record 81.6% of new residential mortgages during the June quarter. The latest Mortgage and Finance Association of Australia figures show how dramatically borrower behaviour has changed over the past eight years.
Broker market share stood at 53.9% in June 2018. By the latest June quarter, that figure had climbed to 81.6%, representing an increase of 27.7 percentage points in eight years. The result means more than four out of every five new residential mortgages are now being arranged through the broker channel.
The value of lending handled by brokers has also reached significant levels. Mortgage brokers facilitated $139.08 billion in new residential lending during the quarter, which was $17.49 billion higher than the corresponding period a year earlier.
That was the highest lending volume ever recorded for a June quarter, demonstrating that broker activity remains substantial even as broader mortgage demand begins to soften.
The timing of the record is particularly notable. Borrowers are navigating a more challenging lending environment following three interest rate increases and changes to investor taxation. Higher borrowing costs have placed additional pressure on household budgets, while serviceability requirements can limit the amount buyers are able to borrow.
Rather than reducing the importance of mortgage brokers, these conditions appear to be encouraging more borrowers to seek assistance when comparing lenders. Lending policies can differ considerably between institutions, meaning a borrower who does not meet the criteria of one bank may have suitable options elsewhere.
This can be particularly relevant when borrowing capacities are under pressure. Different lenders can take varying approaches to income, expenses, existing debts and certain forms of employment. Investors, self-employed borrowers and households with more complicated financial circumstances may therefore find value in having a broader range of lending options considered.
The figures also point to a structural change in the way residential mortgages are arranged. Australia is now one of only three countries where mortgage brokers facilitate more than 80% of residential lending, alongside the United Kingdom and the Netherlands.
That comparison suggests broker usage has moved well beyond being an alternative option for a smaller group of borrowers. It has become a mainstream part of the residential lending process.
One reason may be the expanding number of products and lenders available. A borrower approaching their existing bank directly receives information about that institution’s products. A broker can potentially compare options across a broader panel, giving customers greater visibility over differences in interest rates, fees, features and lending policies.
Competition in the mortgage market can make this comparison increasingly valuable. Mid-tier banks, challenger lenders and non-bank institutions may offer rates or lending conditions that are different from those advertised by the major banks. Borrowers who do not investigate alternatives can potentially overlook options that better match their circumstances.
A broker may also help borrowers understand the practical differences between loan structures. Offset accounts, redraw facilities, fixed and variable rates and different repayment options can affect how a mortgage operates over time.
There are nevertheless important considerations when using a broker. Borrowers should understand how recommendations have been reached, which lenders have been compared and whether the broker’s panel covers a sufficiently broad section of the market.
Fees should also be clear. Consumers need to understand any costs they may be responsible for and should confirm that the recommended loan suits their individual financial position and objectives rather than assuming a broker recommendation automatically represents the cheapest or most appropriate option.
The rapid increase in broker market share does not remove the borrower’s responsibility to review the loan carefully. Interest rates, fees, features and conditions should still be understood before documents are signed.
What the 81.6% market share does demonstrate is a substantial change in consumer preferences. From 53.9% in June 2018 to more than four-fifths of new residential mortgages eight years later, brokers have become increasingly central to the way Australians access housing finance.
The $139.08 billion in new lending facilitated during the June quarter reinforces that shift, particularly given the figure was $17.49 billion higher than a year earlier and represented a June-quarter record.
With interest rates elevated, borrowing capacities constrained and lending policies differing between institutions, navigating the mortgage market has become more complicated for many households.
The continued rise of brokers suggests borrowers increasingly value having an adviser compare available lending choices and help them navigate that complexity. As the mortgage market evolves, the broker channel is no longer sitting on the margins of residential finance. It has become the primary route through which most new Australian home loans are now arranged.
