It could be easy to think that brokers have never had it so good, with record loan originations and market share. But are digital mortgages about to steal some of that volume?
Commonwealth Bank recently announced that they are considering launching their own digital mortgage product, with the promise of approvals in just ten minutes.
Digital mortgages could be seen as a disruptor to the traditional first party/third party split, as they allow for direct B2C approval by lenders to customers.
They are already a significant slice of the mortgage market in the United States and are growing in Australia, with lender 86 400 pioneering their use and new lender Nano doing $100m in approved digital home loans in just one month of operation.
“I think it reinforces the view that we’ve had for a number of years,” said Andrew Walker, CEO of Nano.
“The inevitable shift to digital origination is going to accelerate. The fact that CBA have finally picked up on that trend and are following it is a great reinforcement of our business.”
The question, however, is whether brokers should be scared as digital mortgages, which could be seen as removing the middle man position currently occupied by brokers and allowing customers to secure loans for themselves.
“My view is always to take a step back and ask: what service are you offering? And what remuneration are you requiring for that service?” said Walker.
“If you are genuinely offering a great service, then you will continue to get paid and have a place in any market. As a higher order principle, it’s hard to see how that isn’t always going to be true.”
“With tech and digital disruption across the globe, that logic can be challenge. It’s inevitable that digital mortgages will grow to be a significant portion of the market, just as they are globally.”
“Now, will they be able to capture all customer circumstances, and will all customers want to go through the digital channel? Certainly in the mid-term, the answer is no.”
“There’s always going to be people with complex financial situations that will require the expertise that the broker channel offers, and I can’t see that changing on the horizon.”
“Should brokers be worried? There’s no doubt that digital mortgages are going to eat some of the market share that brokers have, just like they will take some of the share that first party has.”
“If I was a broker, I wouldn’t be worried about digital mortgages, I’d be looking to think how I could embrace new technology to make my business better.”
Nano has a digital mortgage product in the works, but one lender is already offering digital mortgages direct to the broker channel.
86 400 was one of the first to offer digital mortgages to the broker channel, and has recently signed deals with Plan, Choice and FAST to get digital home loans onto major aggregators.
George Srbinovski, Head of Broker Distribution, explained that digital mortgages could be highly compatible with the broker channel and could indeed help brokers to write more business through simplified and accelerated loan approval processes.
“86 400 has always supported brokers,” he said. “We were the first digital home loan for brokers and we continue to support the channel. We’re sure that there will be more similar announcements to those that we’ve had with FAST and other aggregators recently.”
“We’ve also got a product of 85% LVR, no LMI, which further shows that we support the broker. Our digital home loan is a process, and that’s what’s digital about it. It doesn’t remove the human interaction, it’s doesn’t remove anything: it enhances the interaction that the broker is having with their customer.”
“From day 1, being the fastest to yes proposition is what digital is about, and trying to improve on speed and efficiencies, and allowing brokers to provide an outstanding level of customer service to their customers.”
