The number of mortgage brokers writing commercial loans has hit a new high for the second time in a row, with the value of residential mortgages settled also markedly rising, new MFAA data has shown.
According to the 10th edition of the Mortgage & Finance Association of Australia (MFAA) Industry Intelligence Service Report (IIS), the broker channel settled the second-largest volume of residential mortgages since reporting began in 2015.
Detailing broker and industry performance and demographic data for the six-month period 1 October 2019 to 31 March 2020, the MFAA report draws on data supplied by 12 of the industry’s leading aggregators (the last report focused on data supplied by 13 aggregator brands).
The latest edition shows that mortgage brokers settled $98.71 billion in residential home loans for the six-month period, the highest October-March value recorded since the MFAA commenced reporting in 2015, up 12.7 per cent year-on-year.
The figure is the second highest since MFAA started collecting data, closely behind the April-September 2017 peak of $99.9 billion.
However, when comparing the 12 months ending March 2020 to the prior comparative period, the value of loans settled had dropped by a marginal 0.02 per cent, or $30.3 million, to $189.3 billion.
Interestingly, while broker numbers dropped year-on-year by 462 (to 16,598), the total number of home loans lodged rose by a marked amount in the October-March period, increasing 15.3 per cent to 300,374 loans as at March 2020.
Similarly, the average number of home loan applications lodged by brokers rose from an average of 18 loans to an average of 20 loans.
27 per cent of brokers writing commercial deals
As well as writing more residential mortgages, brokers are increasingly turning to commercial business, with the number of mortgage brokers also writing commercial loans through their aggregator panel having increased to a new high of 4,486 brokers in the six months to March 2020.
This is a marked rise from the previous six-month period when a record high of 3,670 mortgage brokers were writing commercial loans.
Looking at the figure as a proportion of all brokers covered by the report, the proportion of mortgage brokers writing commercial loans at the end of March 2020 was 27.4 per cent, according to the latest MFAA data – up from the previous high of 22.1 per cent.
Compared with the previous corresponding period, there were 1,005 more mortgage brokers (or 28.8 per cent) writing commercial loans.
Period-on-period, the largest increases were in NSW and ACT (by 254 brokers or 21.5 per cent), and Victoria (by 235 brokers or 22.6 per cent).
Among the other major states, Queensland was up 164 or 24.4 per cent, Western Australia grew by 109 brokers or 23.7 per cent, while South Australia increased by 50 or 18.8 per cent.
Noting the increase, the MFAA report reads: “The uplift in broker numbers writing commercial lending suggests that in a challenging home loan market, more and more brokers are turning to diversifying into this sector, expanding their portfolio beyond just residential home loans into other growth sectors potentially in response to recent fluctuations and instability in the market.”
Given the increase in brokers writing commercial loans, the value of settled commercial lending also spiked to a new high.
In the October 2019 to March 2020 reporting period, the value of commercial lending settled by mortgage brokers totalled $9.7 billion, up around $700 million or 7.78 per cent compared with the previous six-month period.
The result significantly exceeded the previous high of $9.05 billion, by around $650 million or 7.14 per cent.
Moreover, year-on-year, the value of commercial loans settled by mortgage brokers increased by $905 million (or 10.3 per cent) from $8.79 to $9.69 billion.
The total book value of commercial lending for mortgage brokers continues to grow, reaching a record high of $44.4 billion, with the rate of growth maintaining consistency period-on-period.
Period-on-period, the commercial book value has increased by $1.3 billion or 3.0 per cent; year-on-year the value has increased by $2.8 billion or 6.7 per cent.
Broker share drops
Notably, however, the MFAA report found that broker market share is continuing to fall.
In the first three months of 2020, brokers’ market share of all new residential home loan settlements fell to its lowest March quarter share in five years, at 52.1 per cent.
Quarter-on-quarter, broker market share decreased by 3.2 percentage points, while year-on-year (comparing the previous March 2019 quarter), broker market share fell by 7.6 percentage points, the largest year-on-year decline observed.
The report reads: “This was the first decline observed in market share for broker-originated lending in the first quarter of the calendar year. The result is further evidence of lenders competing more fiercely through their proprietary channels, particularly among the major banks who have used the strength of their balance sheets to actively pursue market share through aggressive discounting, cashback and fixed-rate offerings.
“It also reflects a blowout in lender credit turnaround times and delays in processing discharges, which will have impacted broker settlements to varying extents in the quarter and particularly given the broker channel’s higher concentration of refinancers.”
The market share fall could also be a reflection of the shrinking broker population, which contracted for the third consecutive period, and coincides with a period of increased industry scrutiny and new legislation. This has resulted in “an apparent trimming down of inactive and less productive brokers”, according to the MFAA.
MFAA CEO Mike Felton added: “This market share result, however, belied a strong performance from the nation’s mortgage brokers throughout the six-month period, as the average number of applications lodged per active broker jumped from 16 to 19.6, while the national average value of home loans settled per broker rose above $6 million for the first time in over three years.”
He concluded: “Overall, compared to previous periods, October 2019 to March 2020 was a more positive time for the mortgage broking industry, as a rebound in market activity coincided with an increase in broker facilitated loans.
“It is, however, important to note that this period immediately preceded perhaps the biggest event of economic and social disruption in the past 30 years in COVID-19, the full impact of which on the mortgage and finance broking industry remains to be seen.”