The number of home loans actually settled in New Zealand is running at just 30% to 35% of applications compared with 75% in Australia, says Brian Hayr, senior manager of direct lending at National Bank.
Similarly, the number of home loans settled in New Zealand is running at only 50% to 55% of those approved compared to 90% in Australia, Hayr told last week’s Mortgage Link annual conference.
Mortgage brokers account for an estimated 26% of settled home loans in a market which is showing underlying growth of 8% a year.
"Mortgage broking has become a very large and attractive market and it’s got there very, very quickly. With scale and growth comes responsibility. You don’t grow to an industry of the size you have got without some responsibility falling on brokers," Hayr says.
A focus on quality, professionalism and customer service is the industry’s likely driver over the next year or so as banks focus strongly on containing costs.
"Revenue for brokers equals costs for banks," he says.
One likely trend is increased loan automation for broker-sourced loans. There’s also likely to be increased segmentation within the broker market with banks focusing more on those brokers who deliver higher value.
"There’s likely to be a bit of a carrot and stick approach to brokers with poor settlement ratios."
National Bank already has the data to do that since it tracks every loan by broker. While it hasn’t shared that kind of information with the market, there is likely to be more such information shared in future.
Brokers are at a key point in their industry’s development, Hayr says, citing as a warning the way US investment bankers and share brokers squandered their good reputations through the 1990s.
Likely pointers to the future can also be gleaned by a recent report on the Australian market by Goldman Sachs. It estimated that the major five Australian home loan lenders paid A$154 million in mortgage broker commissions last year and that this will rise to A$377 million by 2004. Brokers’ share of the Australian market is likely to grow from 30% now to between 40% and 45% over the next two or three years.
A major question overhanging the New Zealand broking industry is that while lenders’ strategies for dealing with mortgage brokers are more or less aligned, in New Zealand those strategies are polarised.
For example, Bank of New Zealand recently decided not to deal with brokers at all and, among the other lenders, ASB Bank doesn’t pay brokers trail commissions.
"Will one lender gain an advantage and what might the response be?" Hayr asks. Nevertheless, Hayr’s personal view is that the future of the broker market will be determined by customers chosing to deal with brokers.
