Why more borrowers are turning to a mortgage broker

A record number of Australians who bought a property this year had a mortgage broker in their corner, new research has shown. 

A report commissioned by the Mortgage and Finance Association of Australia found mortgage brokers arranged seven out of every ten (69.5%) new residential home loan settled during the first three months of 2022, the highest proportion ever.

Two years ago, brokers accounted for around half (52.1%) of all new loans settled.

Mortgage broker market share reached a new all-time high in the March quarter. Picture: Getty

MFAA chief executive officer Mike Felton said the increase in market share was reflective of the rapid growth in the industry, which has built further trust and loyalty in the wake of the Financial Services Royal Commission.

“Not only does the consumer benefit from the significant choice, experience, and convenience offered by a mortgage broker, but on home loans taken out since 1 January 2021 they have been protected by an unrivalled best interests duty, further differentiating the channel and providing yet another compelling reason to use the services of a mortgage broker,” Mr Felton said.

The best interest legislation means mortgage brokers must always act in the best interests of consumers.

Anthony Waldron, chief executive of financial services at REA Group, said a separate survey shows that message is getting through to customers.

The survey, commissioned by Mortgage Choice, found nine in 10 Australians are confident their mortgage broker had their best interests at heart when applying for or refinancing their home loan.

“The DNA of mortgage brokers has always included looking after borrowers’ best interests. Eighteen months on from formalising Best Interests Duty and Australians are demonstrating their trust in mortgage brokers,” Mr Waldron said.

Mortgage Choice customer Amanda Paul has used a broker throughout her property journey. Picture: Supplied

Mortgage Choice customer Amanda Paul says she has always used a broker throughout her property journey.

“When I was buying my first home, I decided to use a mortgage broker because I really didn’t know what I needed in terms of a loan,” Ms Paul said.

“I didn’t have the time to shop from bank to bank to try to get an objective view. I didn’t trust the banks to give me the best deal anyway as I felt they were biased towards their own products.”

But she said the value of using a broker really came to light when she purchased her next home with her husband.

“My husband had some issues with his credit history so we ended up on a loan with a very high interest rate,” Ms Paul said.

“Luckily our Mortgage Choice Broker found us a better solution through a different lender.

“He negotiated a streamlined loan with a more competitive rate saving us significantly on our monthly repayments.”

What brokers can offer

Unlike lenders, mortgage brokers are required to act in your best interest when suggesting a loan for you.

The top benefits of using a broker:

Brokers offer borrowers more choice

Most brokers have access to loans from around 30 different lenders, which means borrowers using a broker have a much better chance of finding a loan that truly suits their particular circumstances and financial goals.

Mortgage Choice national sales director David Zammit said almost 60% of borrowers surveyed agreed that brokers can get the best deals on home loans, and this number rose to 75% among those who have used a broker previously.

“Brokers know the market so [they can] compare hundreds of home loan products from a panel of lenders to find you the best deal for your needs,” Mr Zammit said.

Brokers can navigate complex circumstances

Brokers have existing relationships with their lenders which helps them find solutions in more complex situations.

For example, if a borrower has a poor credit history, unusual income sources or an irregular employment history, brokers will know which lenders will be more willing to cater to them.

They are also experienced at advocating for borrowers if they feel lenders are not being reasonable, something that is almost impossible for a consumer to do on their own.

Brokers offer added value for straightforward loans

Experienced borrowers with relatively straightforward financial circumstances will still benefit from using a broker.

Since referrals and repeat customers are how brokers build their business, they are motivated to provide a first-rate, personalised customer service. This means brokers are typically attentive, reliable, quick to respond and willing to go the extra mile for their clients.

For example, rather than just focusing on selling the current loan, a broker will typically look at the borrower’s long term plans to ensure the loan is suitable to achieve their future goals. They will also take a lot of the hassle and stress out of applying for a loan by taking on most of the administration required. Most importantly, particularly for borrowers with multiple loans, brokers will ensure their loans are structured effectively to minimise interest and expenses.

Mr Zammitt expects the popularity of brokers will only grow.

“I’m confident that the exceptional service mortgage brokers provide to Australian borrowers will see broker market share grow,” he said.

“Over the longer term I expect that share to grow to over 90% given the value a broker can provide.”

Of the survey participants who used a broker, they said the top benefits of using a broker were:

• They can do most of the work
• They have extensive industry knowledge
• To access the best deals
• To find the best interest rate.