Mortgage brokers are on the road to recovery as the economy improves
Melbourne, Australia (PRWEB) November 29, 2012
Buying one's own home has long been the Australian dream. It is often the biggest financial decision an individual will make in their lifetime, and for that reason, borrowers find comfort in consulting an expert who can help them wade through the complex range of products. The Mortgage Brokers industry in Australia is relatively new, having been around for less than two decades. Mortgage brokers have filled a gap in the market that has been missing in the past, and are seen as providing comprehensive, convenient and unbiased advice to their clients. Because they represent a panel of lenders, they are able to offer their customers a range of products and tailor a mortgage to their specific needs. According to IBISWorld industry analyst Tim Stephen, “for these reasons, demand for services from the Mortgage Brokers industry has grown, but the industry was not immune to the economic downturn”. Revenue growth over the five years through 2012-13 is estimated to measure a compound annual 0.1%, as the industry has suffered through reduced credit volumes and flat house prices.
For 2012-13, the Mortgage Brokers industry in Australia is estimated to be worth $1.57 billion on the back of healthy year-on-year growth of 4.4%, as demand continues to rebound and house prices show signs of growth. In the five years through 2017-18, the industry is expected to break free from the shackles of the global financial crisis, typified by tight credit and record levels of consumer savings. Participation will increase due to favourable conditions, and competition will intensify, led by the industry's largest players. “Supply of finance is expected to rise as credit loosens and more lenders enter the market,” adds Stephen. This will contribute to growing demand for broking services as lenders continue to use brokers as a medium for distributing their products. IBISWorld forecasts that by 2017-18 the industry will be worth $1.9 billion.
Industry market share concentration is moderate; the three largest players are Australian Finance Group, AHL Holdings and Mortgage Choice. Broker groups are expected to undergo considerable consolidation in the coming years. Since the financial crisis, which was essentially caused by money being lent too freely, banks have tightened margins and commissions paid to mortgage brokers. This has put pressure on operators to find more-efficient ways to continue profitable operations. Lower commissions are likely to lead to an accelerated level of consolidation, via mergers and acquisitions and industry exits. While the total number of operators within the industry is expected to grow, the average size of each will also increase. Lower margins on residential mortgages mean that efficiency and scale will become more important, and smaller players will have a hard time staying competitive.
For more information, visit IBISWorld’s Mortgage Brokers report in Australia industry page.
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IBISWorld industry Report Key Topics
Mortgage brokers in Australia generally act on behalf of lenders, aiding borrowers in sourcing and applying for mortgage finance (for both residential and investment real estate purposes), and in refinancing existing mortgages. In general, brokers do not charge mortgagees any fee for their services. Rather, mortgage brokers receive origination and trailing commissions on originated funds directly from lenders.
Key External Drivers
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About IBISWorld Inc.
Recognised as the nation’s most trusted independent source of industry and market research, IBISWorld offers a comprehensive database of unique information and analysis on every Australian industry. With an extensive online portfolio, valued for its depth and scope, the company equips clients with the insight necessary to make better business decisions. Headquartered in Melbourne, IBISWorld serves a range of business, professional service and government organisations through more than 10 locations worldwide. For more information, visit http://www.ibisworld.com.au or call (03) 9655 3886.