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Almost 80 per cent of mortgage brokers expect the volume of loan applications to increase amid economic uncertainty, a broker survey finds.
On the back of rising interest rates, house prices softening and rising inflation, the latest broker survey by Equifax revealed brokers expect economic factors to impact lending assessments over the next 12 months.
Similarly, Equifax’s Mortgage Broker Pulse survey, which included 40 brokers in April 2022, noted 25 per cent felt their customers were concerned over being “locked out of the property market”, and 19 per cent were concerned over increasing constraints on loan approval delayed approval timelines.
While low-interest rates drove strong growth in mortgage demand over the past two years, the latest Equifax data showed mortgage demand in the March quarter 2022 dropped by -4.6 per cent, compared to the same period last year.
However, the study noted despite the drop in mortgage demand, the rising rate environment will likely encourage home owners to refinance to keep their repayment costs as low as possible, which could see demand increase.
Indeed first home buyers (FHBs) are also facing challenges as the market changes, while Equifax noted around 190,000 first home buyers entered the housing market between January 2020 to July 2021, it suggests the increase in mortgage limits may impact loan serviceability, as noted earlier by the Reserve Bank of Australia.
Despite the challenges that lie ahead for first home buyers, broker Nicole Cannon at Pink Finance said inquiries for first home buyers have continued with some customers now happy to forego benefits.
Ms Cannon said FHBs are even “looking into investment properties” because they just want to get into the market.
“We’re also still getting people with a lot of equity in their homes wanting to improve their current home rather than sell, due to the increase of the market and cost of stamp duty,” Ms Cannon said.
“So, we’re having a lot of conversations with customers about whether to keep and renovate or sell and upgrade.”
Another challenge FHB could be faced with, Ms Cannon added is their pre-approvals being guaranteed as borrowing capacity’s change.
“One of the biggest challenges in servicing loans is managing customers who have pre-approval in place but are going up to their borrowing capacity. Many customers may think their pre-approval will be fine, but with interest rates going up, they could find themselves in a pickle with reduced borrowing capacity,” Ms Cannon said.
The survey also found that brokers are anticipating an increase in workload could impact their ability to educate people on mortgages and get the best deal.
Indeed the recent rise in interest rates, increasing inflation and federal election are all likely to have an impact on first home buyers, upgraders, investors and refinancers alike, general manager consumer, James Forbes said.
“We expect to see more churn and greater competition amongst lenders for market share,” Mr Forbes said.
Despite concerns over some friction ahead, Mr Forbes said brokers are refusing to take a “doom and gloom” approach.
“It’s clear brokers are working to weather the storm, continue brokering the best deals for their customers and help them live their financial best,” Mr Forbes said.
Boosting expertise and efficiencies with technology
In the face of recent market pressures and delayed loan approvals, the survey noted brokers are turning to technology to arm against industry challenges.
It was revealed 58 per cent of respondents believed technology could create the greatest efficiencies in gathering data and insights about customers’ current borrowing power and serviceability.
According to 68 per cent of brokers, application lodgement is one of the “top two most time consuming processes”, while lender SLA delays cause the most significant impact on loan approval timelines.
Loan Market Broker Imogen Alexy said having a “fantastic CRM system” was essential.
“Other technology that has been very helpful is access to servicing calculators that allow you to input the data and provide the results for multiple lenders with their policies built in – saving a significant amount of time and repetitive data entry,” Ms Alexy said.
“I have also seen how helpful it is when banks have an end to end digital process. It really speeds up the application time and allows clients to complete the application without having to go into a branch or post documents.”