Brokers set commercial lending record

The number of brokers diversifying into commercial lending has reached a new record, coinciding with a significant rise in settlements year-on-year, according to the latest six-monthly figures.

It is one of three records captured in the MFAA Industry Intelligence Service (ISS) 15th edition report for the period of April 2022 to September 2022, released on March 31. The report also shows total broker numbers surpassed 19,000 for the first time, while the total value of loans settled reached $181.2bn, up 9.2% compared to April to September 2021.

Meanwhile, ABS lending indicators released on Monday show new loan commitments for housing fell 0.9% over February, with lending to owner-occupiers falling 1.2% and lending to investors falling 0.5%.

According to the latest MFAA IIS report, which draws on data from 11 aggregators, mortgage brokers chalked up $17.2bn in commercial loan settlements over the six-month period, up $3.8bn (28.65%) year-on-year, and up $1.2bn (7.89%) compared to October 2021 to March 2022.

The number of mortgage brokers writing commercial loans reached 6,118, which the MFAA said represented a “new all-time record”. MFAA CEO Anja Pannek said on Friday that commercial and equipment finance remained a “significant opportunity” for mortgage brokers to expand their service offering, both to existing home loan clients and new clients.

According to MFAA IIS report figures, an additional 850 brokers wrote commercial loans year-on-year.

Marketplace Finance head of third party relationships Dino Pacella (pictured above left) told MPA that diversification went beyond discussion about small business loans, to looking at the bigger picture.

Brokers’ share of residential loans written reached 71.7% over the September quarter (this has since dropped back to 69.3% over the December quarter).  While commercial lending had grown year-on-year, Pacella said that there was still a significant gap in terms of where brokers could add value.

“There’s a lot of lenders now that will help clients that potentially the big banks still won’t look at,” Pacella said.

Pacella said commercial finance options could become confusing for small business owners – and  those looking at commercial properties – to navigate on their own.

“[The question is] am I going to spend three weeks trying to run around five, six, 10 different lenders or is there a person who can help me, in which case, they go and see a finance broker who has that commercial knowledge,” Pacella said.

The value of diversification had been discussed within the industry for many years, and Pacella said that brokers who had paid heed to this message were likely to be in a solid position.

As it was difficult for brokers to specialise in everything, Pacella suggested brokers “seek out people who can help” and outsource if necessary, to provide a continuous experience for their clients.

“You’ve got to be that one stop shop for that person [so] they don't feel like they've got to go somewhere else and get it answered,” he said.

Outside of the broker being the conduit between lenders and borrowers, Pacella said that growth in total broker numbers (now 19,236) showed the industry had significant impact on the provision of jobs within the economy.

“Outside of market share growing from a mortgage perspective, when you start seeing more people are joining the industry, I think that’s a really strong message … everybody must be doing something right,” Pacella said.

Female broker numbers edge lower

The MFAA IIS report also showed that the proportion of female broker numbers dropped to 25.4%, down from 25.5% over the previous period. The MFAA said this was the lowest level since the measure was tracked.

According to the report, the number of female brokers increased period on period, from 3,312 over October to March, to 3,358.

Indigo Finance founder and owner Melanie Cunliffe (pictured above centre) identified from the report that the number of female brokers recruited was up 26.87% period-on-period, while male recruits grew by 10.61%.

“It shows that we’ve had more female brokers than in the past joining; however, the proportion (share) of female brokers overall is decreasing,” Cunliffe said.

While the industry may be recruiting more female brokers, it was struggling to retain them.

Cunliffe suggested that brokerages carry out exit surveys to understand why female brokers were leaving, and what segment they represent, whether they be new recruits, up-and-coming brokers or industry veterans.

She said that there could be a gap in understanding about what the role of a female broker entailed. Being a broker can be really hard work: while flexible, it’s also demanding, and starting out can be really tough, she said.

For example, female brokers branching out on their own needing a part-time, flexible role could find it challenging, Cunliffe said.

Cunliffe said she would like women considering a career in the industry to see the “other side” of being a female broker, namely that it was entrepreneurial, exciting, and varied. In a day, a broker could move from structuring a financial portfolio, to negotiating with lenders, and hearing the excitement from someone buying their first home.

“I don’t know many roles where you could experience that in one day and have the opportunity to have your own style and grow a business, be that your own business or another established business,” Cunliffe said.

Commenting on the increase in broker market share (71.7% over the six month period), Cunliffe acknowledged that refinancing played a significant role in demand for brokers.

"It's not as easy to refinance as it used to be...[there are] tighter assessment rates and with interest rates going up, I think a number of borrowers are looking at a broader number of lenders and with that comes different rate tiers, rebates...it really seems that they need that extra guidance," Cunliffe said.

Fall in new housing loans

February lending figures, released by ABS on Monday, showed the value of housing loan commitments was down 30.9% year-on-year (down 0.9% over the month), reaching $22.6bn.  

Secure Finance Services accredited finance broker Sakib Manzoor (pictured above right), one of MPA Top 100 brokers for 2022, said that while the monthly decline was expected, the rate of decline had reduced.

Once interest rate rises come to a halt, Manzoor said he expected new lending figures to start to turn positive.

“I believe we are just about to see the bottom … the sentiment is still there in the market,” he said.

Referring to the monthly drops in owner-occupier and investor lending (down 1.2% and 0.5% respectively), Manzoor said he expected those figures to bounce back.

Looking at lending volumes within his own business, Manzoor said that buyer sentiment had started to resume towards the end of January, including among first home buyers.

According to latest ABS figures, first home buyer loan commitments were up 0.9% over the month (down 26.8% year-on-year), with the total value reaching $3.49bn.

“Among first home buyers for example, our business is seeing a lot of willingness from people to look out for new properties, largely due to there being a lot more supply, and government incentives being offered,” Manzoor said.

Among those benefits include the removal of stamp duty by incoming NSW Premier-Elect Chris Minns.

“The decline has somewhat now stopped, and I think we are towards the end of it,” Manzoor said.

According to the latest MFAA IIS report, the value of home loans settled by mortgage brokers was $94.4bn, down from a record high $96bn in the June 2022 quarter.

Total average broker remuneration (prior to costs) was $195,356, which included an average of $123,803 in upfront commissions and $71,553 in average trail commissions.

There is now one mortgage broker per 1,351 people in Australia, up from one broker to 1,408 people. 

What do you think of the latest industry figures, including total broker numbers and the value of commercial loan settlements?  Share your thoughts in the comments section below.