The Value of Mortgage Broking

As housing affordability continues to challenge home buyers across all income levels and demographics, Australia’s experienced mortgage brokers help to drive choice, competition and valuable services for the Australians who need them most.

Mortgage brokers encourage competition between all lenders in the market, which has contributed to a fall in lenders’ net interest margins (NIMs) of more than three percentage points over the past 30 years. This benefit is enjoyed by all Australians looking to buy a home or invest in property, not only by mortgage broker customers.

Consumers benefit from the depth and breadth of experience their mortgage broker brings. With an average of 13.8 years of industry experience, mortgage brokers offer advice and support throughout the life of consumers’ home loans, which means lower search costs, more diversity of product choice and service.

At the same time, a key finding of this report is the average income of mortgage brokers who operate as sole traders. On average, these brokers earn a comparatively modest $86,417 after costs and before tax. This shows – like most small businesses in Australia – mortgage brokers run small businesses that rely on satisfied customers and a stable regulatory environment.

Customer satisfaction is the most critical element of a mortgage broker’s success, with more than 70 per cent of mortgage brokers’ business coming from existing customers. This is (at least partly) driven by customer satisfaction, with more than 90 per cent of customers reporting that they are happy with the service they receive from their mortgage broker.

With more than half of all home loans each year originating from the mortgage broking channel, this report highlights the importance of the industry to the broader Australian economy. The mortgage broking industry contributes $2.9 billion to the economy each year and directly employs more than 27,100 full-time equivalent jobs.

Mortgage brokers play an important role in driving competition between lenders, making it cheaper for all Australians to finance their homes. The average mortgage broker has access to 34 lenders and uses an average of 10 lenders on their panel. This choice and competition is demonstrated most clearly by the fact that market share of broker-originated loans for lenders who are not major banks – or their affiliates – has increased from 21.4 per cent to 27.9 per cent in just four years.

This increased competition powered by mortgage brokers is an enormous benefit for small lenders. Without mortgage brokers, these smaller lenders would need to significantly increase their branch footprint to maintain their existing market share. On average, each small lender would need to build 118 new branches to maintain their current share.

The mortgage broking industry also has a positive impact on rural and regional Australians. Three in 10 mortgages arranged by mortgage brokers are for customers based in rural and regional areas. Without brokers, regional Australians would have significantly reduced access to home loan financing options.

The report provides an in-depth understanding of the role mortgage brokers play in Australia. It demonstrates how mortgage brokers strengthen the entire Australian mortgage lending industry by fostering competition, providing service over the life of a loan, strengthening access to smaller lenders and supporting all Australian home buyers.

To find out more, read the full The Value of Mortgage Broking report on the Deloitte Access Economics website, bit.ly/ValueofMortgageBroking.

The Value of Mortgage Broking report was prepared for the Mortgage Broking Industry Group (MBIG) by Deloitte Access Economics.