Michael Higgins – Portfolio Manager – December 10, 2019

If you’re looking for a home loan in Australia today, chances are, you’re going to use a mortgage broker. In the latest home loan channel survey, 6 out of 10 residential mortgages are now originated using a broker (Figure 1). Broker share in the early 1990s was estimated to be in the teens at best! The explosion has been a function of i) a better understanding of a brokers value proposition and more competitive interest rates, ii) the consistent closure of major bank branches which have shrunk ~40% since the early 1990s, and iii) the increased complexity required in getting a loan.

The Royal Commission has also been a huge positive to brokers driven by more intrusive and detailed requests for information about income and expenditure. Interestingly, when the UK announced a similar Mortgage Market Review (MMR) in April 2014 post the GFC, broker originated loans has since ballooned to ~80%. Tighter regulation under the MMR drove borrowers into the arms of brokers, as applicants faced longer interrogations to ensure they could repay their loans.

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