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66% of borrowers more likely to use a broker than go direct: Brighten

Publication Date: Tuesday, 4 Jun 2024
This article originally appeared in The Adviser

Two-thirds of borrowers looking to buy a home in the next five years think they’d be more likely to use a broker than do it themselves, a new survey has found.

While several banks have been looking to prioritise direct and digital-only home loan offerings in recent months, a new survey from Brighten Home Loans has revealed that future home buyers are more likely to use a broker for their next mortgage than attempt the process themselves.

Brighten Home Loans’ 2024 borrower survey asked a sample of 1,008 consumers who had either bought a home in the last five years or were planning to buy a home in the next five years their thoughts on how they would access a mortgage.

According to the borrower survey, which was conducted in the second week of May 2024, 65.7 per cent of borrowers looking to buy a home in the next five years consider themselves more likely to use a mortgage broker than engage in self-directed borrowing.

Noting the figure, Brighten’s head of sales, Chris Meaker, said that while this was below the latest MFAA market share figure (of 74.1 per cent), the statistic “made sense” given the typical borrower journey.

He explained: “Borrowers often start their mortgage journey thinking they can do it alone. However, when they begin comparing products and applying for loans, the wheels can come off, and they then turn to a broker for advice.

“This really underscores the importance of the consumer-education role that brokers play,” Meaker said.

The findings show that future home buyer confidence may be increasing in the broker channel, with the Consumer Access to Mortgages Report 2023, released by Agile Market Intelligence in association with the Finance Brokers Association of Australasia (FBAA), finding last year that just 44 per cent of future home buyers would use a broker for their home loans.

As well as showing a preference for using a broker to access a mortgage, the Brighten Home Loans’ 2024 borrower survey revealed that non-bank lenders were also a strong consideration for the majority of future home buyers.

According to the survey, 61 per cent of consumers looking to buy a home in the next five years said they would consider a loan from a non-bank lender.

When asked what factors would make borrowers consider finance through a non-bank lender, the primary factor was “competitive interest rates (63.7 per cent), followed by suitability of eligibility requirements (50.7 per cent).

The advice of brokers was also a leading factor for considering non-bank lenders, with 45.2 per cent of future home buyers stating this was a strong consideration.

Meaker commented: “It’s good to see that broker advice is one of the leading reasons customers consider non-banks for their property purchase. This means that brokers are presenting customers with a range of options and empowering them with choice.”

Indeed, brokers have long championed the non-bank space, with brokers believing the non-banks to be the most committed to the broker channel.

However, Meaker noted that some consumers believe that non-banks may not be as “safe” as banks. Indeed, of the 39 per cent of prospective borrowers who said they would only consider banks for their next loan, over half (57.5 per cent) said they felt banks were a “safer” option.

Meaker highlighted, however, that the “stubbornness of the myth about non-bank lending” underscored the need for brokers to help educate their clients.

“Non-bank lenders comply with the National Consumer Credit Protection Act (NCCP) just as banks do and are regulated by ASIC. Additionally, non-banks are required to have a credit licence and meet the requirements of Australian consumer and privacy law.

“These regulations and requirements ensure that non-bank lenders are a safe option for borrowers in Australia,” Meaker said.

“Brighten has always advocated for education, especially to empower underserved segments of the mortgage market. If the mortgage industry — lenders and brokers alike — continues to empower borrowers, there is no reason why we won’t see non-bank market share climb higher in the next few years, making home loans more accessible to a wider group of Australians with diverse financial needs,” he concluded.