I actually think that most people miss the value proposition of a mortgage broker for the bank vs servicing internally and while the royal commission has caused a stir, in the current lending environment, using a mortgage broker is invaluable.
Let me explain.
If i'm a bank and I want to write loans, I have to advertise, capture that enquiry, get an internal broker to service and process the paperwork, run the approval, keep them informed, assess the application and then if successful process the loan.
Under that model, in a normal market, say you have 10% to 25% of the applications successful of the original enquiry (the success rate would be materially higher for % of formal applications). So as the bank your spending $$$ on that process and there is a cost per successful transaction relative to each enquiry. The down side is that of those enquiries that don't progress, they still have a commercial value because some of them will borrow money, just not from your product offering. As the bank, you have no way to capture that value.
Compare that to a mortgage broker model,as the bank you don't have to deal with the lower % end of those enquiries, making the efficiency of your department much better. You probably have built a reimbursement model that pays out the similar cost you would have spent on servicing the 10 people and getting one loan so the broker is doing ok but you as the bank are doing better because you don't have the HR issues and resourcing management issues. However switch that around, the broker because he has a panel of products, can steer people who are not suitable for the bank product into other more suitable products.
So your strike rate per enquiry goes from 10% to 25% per enquiry to 20% to 25% of enquiry that actually pays a fee.
So are the economics of the above scenario likely to change??? No, actually given the increased lending scrutiny its actually going to get more defined because each banks ability to lend is so constrained.
Its a complicated world, but I see a future here. There is going to be some drama over at least the next 12 months, but coming out the other end this will have some growth.
