We have updated our mortgage industry models to take account of the latest loan volume, channel and commission data to January 2017.
New loans have continue to flow via the mortgage broker channel, thanks to increased demand for mortgages, and households appreciating the mortgage broker value proposition. Our surveys show portfolio investors, solo investors, refinancers and first time buyers are all quite willing to use third party assistance to get a mortgage. Especially, when pricing changes are in the works, and rates are volatile.
We estimate that around half of all mortgages written in recent months have been originated via the broker channel. However, we also now believe that this has reached a peak, thanks to CBA’s recent comments that it will favour its branch channels, and some investment loans will only be available via its proprietary network. As one of the industry’s largest players, this will impact. Indeed, their new loan volume via the broker channel slipped to 43% from 46% six months back despite strong loan growth. Their portfolio is 42% broker originated. We have therefore adjusted our market model to reflect a small fall in volumes thought 2017.
At the moment new loan broker commission pools are looking very healthy, with new business earning estimated up-front commissions of more than $100m a month, and equating to more than $1.1+ bn a year. This is helped by a combination of larger loans and volumes.
However, we suspect that transaction volumes will slow now that interest rates are being raised on investment loans in particular, borrowers appear more uncertain about the impact interest rate rises, and there is of course talk of changes to the rules for investment property, which may spook the horses. Given the tail-off in owner occupied loans, we suggest that we may be approach a “peak” of mortgage broker volumes and commission pools.
Brokers of course will benefit from trails which are paid on existing loans in subsequent years, so many will have now built up a nice little nest egg, so it is by no means all doom and gloom. But “peak commission” may just have passed.
