Which home loan channel do Australians prefer? New survey
3 November 2016: A survey of more than 1000 borrowers who took out a home loan in the last two years revealed customers who use mortgage brokers tend to be more satisfied with their experience than direct to lender customers.
The online survey, together with responses from additional focus groups, was undertaken by Deloitte on behalf of the Mortgage and Finance Association of Australia (MFAA).
The survey asked consumers why they decided to go to a mortgage broker or directly to a lender when taking out a home loan, their experience during and post the process, and whether they would use the same channel next time.
Mortgage broker customers most satisfied
Deloitte financial services partner James Hickey who led the research said: “A key finding was that while overall satisfaction levels were high for both channels, with more than 90% of borrowers satisfied with the service provided through either a mortgage broker or direct to a lender, mortgage broker customers were most satisfied.
“Some 32% of mortgage broker customers rated their experience of using a broker at 9 or 10 out of 10, (where 10 ‘exceeded expectations’), compared with 20% of lender customers giving a similar ranking.”
Hickey said: “It was apparent from the focus groups, that the expectation going into the process had an impact on the satisfaction outcomes. Broker customers were largely after a relationship and support through the process. There was high satisfaction when this was provided.
“Direct to lender customers, on the other hand, had largely made up their minds as to what they wanted. They tended to be seeking best price and product features from their lender, so it was harder to exceed their expectations.”
Other key findings
- Different customers choose different channels: Customers said they chose to use a mortgage broker for relationship reasons. Some 34% had an existing relationship and a further 32% were personally recommended to the broker by family or friends. Those customers who chose to go direct to a lender were most influenced by their existing banking relationship with the lender (58%).
- Broker customers value support, not just price: The next reason customers chose to go to a broker was for support through the mortgage process (19%), compared with only 7% for direct to lender customers. Direct to lender borrowers ranked best price (29%) as their next most important influence after their existing relationship, compared with 18% for broker customers.
- Brokers rated as more likely to be acting ‘in the best interest’ of customers: While 82% of broker customers and 73% of direct to lender customers agreed that the broker or lender generally acted ‘in their best interest’, broker customers were more confident in this statement. Some 40% of broker customers felt the broker acted in ‘their best interests’ at all times, compared with only 22% for direct to lender customers.
- Customers are loyal to their channel of choice: 73% of broker customers would use the same broker again and 65% of direct to lender customers would go direct to the same lender again. However 20% of direct to lender customers said they would go direct to a different lender next time. Only 12% of broker customers would use a different broker.
- Online ‘end to end’ a future consideration, but most customers value ‘face to face’: When asked if they would use the same channel again, 95% of survey participants said they would use either a broker or go direct to the lender. Less than 5% said they would take out a home loan directly online by themselves without any support from either a broker or lender representative.
- Customers favoured commissions: In the focus groups, customers agreed that the broker should be remunerated for the value they provide. They said they were comfortable with the current method whereby the lender remunerates the broker by commission. In the survey 70% of customers using brokers were aware how the broker was remunerated, nevertheless 30% were still unclear how that occurred. When asked if they would pay the broker for their service, 63% of broker customers would be prepared to consider it. However 37% of broker customers would either go direct to the lender if they were asked to pay or would still not want to pay anything explicitly to the broker for the service.
Hickey said: “The initial decision by customers of whether to use a broker or go direct to a lender is all about relationships and need. Customers said they chose a broker because they had an existing relationship (34%), or were recommended to the broker by family or friends (32%). Those going to a lender either had an existing banking relationship (58%) or sought the best price (29%).”
“Our view is that the research indicates that broker and direct to lender channels, rather than being seen as competing against each other, can actually be viewed as complementary to each other. Customers are choosing to go to either a broker or direct to a lender for quite different and distinct reasons. Broker customers want and value the relationship and support through the process, while direct to lender customers have already settled on their choice and are largley seeking best price and features.”
Jenny Wilson, customer practice lead partner at Deloitte said: “The focus group insights validated these findings. Word of mouth was a powerful education and awareness impact for brokers.
“Whereas the perception of brand was important for customers who go to the lender directly. As was whether they had a personal banker relationship.
“In both the focus groups and the survey, direct to lender customers placed a higher value on getting the best price (29%) compared with broker customers (18%).
“In addition the ‘navigator’ role or the support a broker could provide was valued at 19%, compared with a 7% value rating from direct to lender customers.
“The direct to lender customers said they had performed their research and were largely focused on best price by the time they went to the lender.”
A number of the focus group participants also said it was simpler and easier to go through a broker as they perceived that mortgage brokers ‘could get things done faster than a banker in a branch’. Many also felt it was ‘more efficient’ through a broker, as they know which banks are likely to approve their specific loan application circumstances.”
The MFAA interim CEO Chris McRostie said: “It was pleasing to receive independent affirmation that customers are more than 90% satisfied with the service provided by brokers when taking out a home loan. When we commissioned the survey, we wanted an independent understanding of the channels customers preferred and why. We also wanted to know what customers valued most and what providers could do to improve their services.
"Deloitte found that 82% of broker customers felt that brokers generally acted in their best interests - with 40% saying brokers acted in their best interests ‘all of the time’, and a further 42% comfortable that brokers did so in general.
“However we do want to continue to build on our personal relationships with our customers, and make sure that those customers who feel brokers act in their interest to a limited extent change to be absolutely certain that they do so ‘at all times’. This is an area we will focus on.
“In addition our broker community can continue to improve its after-sales service. Although 45% of those surveyed rated brokers as providing ongoing advice when they needed it, with 22% noting they had proactive interactions about their mortgages, almost 20% said they no longer had contact with their broker. This is an area where we would like to see improvement,” McRostie said.
In looking forward to the role of digital disruption, Hickey said: “When it comes to the aspiration to provide a home loan online end-to-end, our survey highlighted the gap between customers saying they would ‘consider’ online (30%), compared to less than 5% saying they actually would use it. The focus groups reflected this, with both broker and direct to lender customers less positive about using online only for the home loan process. Instead they said they valued the ability to have a personal relationship and contact with the broker or lender representative.”
The MFAA’s McRostie added: “While this supports the value that a broker adds through their personal role with the customer, brokers still do need to adapt and integrate better the various evolving digital technologies to continue to provide a personal service in a digital world”.
Hickey said: “One of the very positive findings from the survey was that more than half the customers felt they had grown in confidence from the process, regardless of channel. This is a sign that the education and awareness that both brokers and lenders are providing their customers through what can be a complex and uncertain process, is improving overall levels of consumer confidence in mortgage lending.”