Consumers seeking to refinance their home loans are ditching branches and brokers and going online to do so, according to new data.
According to the data from online non-bank lender, loans.com.au, 53% of customers borrowing for property were refinancing an existing home loan, and they were increasingly opting to go online.
Kim Cannon, managing director of Firstmac – who is behind loans.com.au – says this demonstrates that customers are informed and empowered in the home loan application process.
“These are people who have identified the way to get the best deal on their home loan is not through one of the big banks, it’s through a lean lender who doesn’t pass on the costs of a branch network, broker commissions, and advertising campaigns,” he said.
“Borrowers who are refinancing know their way around the home loan sector; they’ve been through the exercise with their original lender.”
Cannon says he expects a greater shift towards online lending, as it is simpler and more convenient.
“In the past year or so, banks, credit unions and building societies have closed 130 branches around Australia, while loans.com.au’s application rate has increased 187 percent and loan amounts have doubled,” he said.
“It doesn’t seem to bother customers that there is not a local branch to walk in to; they are happy to manage their money from the couch, the office, train, park, or café.”
It is this simplicity and convenience that Cannon says may cause a threat to the broker industry.
"Online lending is an increasing threat to brokers when you consider the trajectory of other fields that follow a brokerage model of service. Look at travel agents; once, people planning their holiday would go to a travel agent who would take care of all their bookings and that would be that. Now, if people go to a travel agent, it’s often for information that they will take away and do their own bookings and make savings. There used to be a travel agent on every corner, but now they are few and far between, and mostly used for particularly complicated travel arrangements."
Cannon says brokers will have to adapt and innovate if they want to co-exist in this increasingly online and DIY culture.
"That is where brokers will be able to demonstrate their worth for clients, on complicated loan arrangements that require expertise and industry knowledge. It’s not enough to just talk to clients and help them fill out forms; online lenders do that too," he told Australian Broker.
"Brokers need to increase their qualifications to be able to offer valid financial advice to their customers. It’s not enough to use the same couple of lenders, do the customers’ paperwork, submit it, and collect a commission. People want value. They want knowledge. They want something they can’t do for themselves."
It should be noted that loans.com.au does not engage in third party broker distribution.
