The Value of A Mortgage Broker

2 December 2015
A recent commentary on a study commissioned by the Mortgage and Financial Association of Australia (Observations on the value of Mortgage Broking – prepared for the Mortgage & Finance Association of Australia May 2015)) to examine the value of mortgage brokers to both lenders and customers has just been released.  The report was compiled by collecting qualitative customer data and interviewing lenders to get their feedback on the true value that mortgage brokers offered to both of these groups.  
Most lenders noted that the broker channel satisfied a need that is demanded by the customer.  The cost for the loan to be drawn down and the quality of the loan through the broker channel was no different than that through the branch.  This contradicted previous assumptions that broker introduced loans were inferior in Quality and more expensive to the lender.
It was noted that the further development of the partnership model with lenders was likely to deliver better outcomes for consumers. “Clients who used the broker channel generally had high levels of satisfaction and advocacy as they felt a broker provides access to a wide range of products, matches customers with the most suitable product and takes the stress out of the arrangement process”. Consequently many lenders believe that the broker channel could account for as high as 60% of system growth in the future. 
Although customers feel they receive a superior experience from brokers, a few areas were highlighted for further development. Customers felt that the broker could play a broader role in arranging other financial products. 
It was shown that the current growing trend of using Digital interaction could complement the existing face-to-face model and potentially assist brokers to expand their relationship with customers to that of a trusted advisor. This is likely to require brokers to broaden their product offering to customers through other banking and insurance products.
The business model of the broker has evolved since the 2000s from being transactionally focused on customer switching to a relationship model whereby they work with lenders to help assist in customer retention. Again contradicting the belief of some lenders that Brokers were simply interested in churning clients in order to be paid for refinancing loans.  
This shift has helped reinforce the strategic importance of brokers for most lenders whether through providing additional channel choice for customers or distribution leverage where it currently does not exist. Despite the shift in approach, the value proposition of the broker remains the same: to provide choice, expertise and convenience to customers in their home buying journey. Feedback from consumers suggests this value proposition is likely to be valued well into the future.

Published In Whakatane Beacon

This post was written by

Trish Marsden - who has written 96 posts

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