When you decide to take out a home loan, who are you talking to? A bank, a broker, or are you discussing it with friends, colleagues and family first?
The Mortgage and Finance Association of Australia (MFAA) recently noted that in the September quarter of 2015, 52.6 per cent of all residential lending was organised through mortgage brokers - a new record.
These results solidify the place of finance brokers in the Australian loan market,"
noted Siobhan Hayden, CEO of the MFAA.
They show that brokers make a difference to the industry."
Today we launched the Women in Finance initiative! What an inspiring time with @mfaa Siobhan Hayden and @markbouris pic.twitter.com/77sL1AYl2g
— Yellow Brick Road (@YBRWealth) March 8, 2016
But where does the industry move from this record high? Anyone organising their wealth management would do well to pay attention to the ongoing growth of this sector, as it could widen (or limit) their options for borrowing money in the future.
The story so far
In IBISWorld's Mortgage Brokers in Australia report, the industry as a whole is dissected from its inception to present day - and beyond. It shows that the industry is currently at a mature phase of its life cycle, having spent roughly the last 20 years undergoing rapid growth.
Over the five years to 2015, it saw annualised growth of 4.1 per cent each year. Sector-wide revenue was $1.8 billion in the 2014-2015 financial year, with profits of $359.9 million. Factor this in with the increasing penetration of brokers in the residential lending market, and they're a very strong force for anyone borrowing to buy property.
Using a lender and a home loan calculator can get you so far, but it appears that more and more people are opting for the services and diversity of products offered by brokers. And from here?
Growth in the pipeline
Over the next five years, IBISWorld predicts a slowdown for industry expansion, as annualised growth settles to 2.1 per cent. More than three quarters of current brokers are situated in either Victoria, New South Wales or Queensland - two established property powerhouses and one up-and-comer.
Considering that BIS Shrapnel anticipates strong growth in southeast Queensland over the next few years, it seems fair to say there could be significant expansion for brokers in the Sunshine State.
Interest rates staying low could also impact how people use mortgage brokers for home loans. While there was no increase in the Reserve Bank's official cash rate between 2011 and 2015, as the economy rebalances there could be room for rate rises in the coming years.
While this can impact home loan demand, it may also see more people turn to brokers as they can offer products with lower interest rates than what bigger banks can provide. Overall, it seems like brokers will become more and more of a fixture in the home loan market.
Why are people getting home loans with a broker?
On top of the variety of products offered by a broker, IBISWorld identified a number of other reasons investors and first time buyers alike were turning to this method of borrowing. One of the key elements here was that they are more flexible with time and location, and can visit Australians wherever they need service.
This is one of the key facets of the Yellow Brick Road experience, in that we tailor our work to suit everyday Australians. Not everyone can take the time out of their day to go and visit the bank, which is why wealth managers, brokers and essentially any financial planning professional needs to change their routine to suit the client.
If you want to work with a local Yellow Brick Road representative, don't hesitate to get in touch. We can help you work out the ideal way to manage your wealth and make the most of today.