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Despite variable interest rates having risen month-on-month, the price of bank mortgages is an increasingly attractive factor for brokers when recommending banks to their clients.
Analysis of the latest monthly Broker Pulse survey from Momentum Intelligence revealed that the price of bank home loan products is a growing attraction for brokers when recommending a bank to their clients.
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The survey of 235 brokers, conducted between 1 and 14 July 2022, has found that “product pricing” remains the leading driver for brokers when recommending non-major banks to their clients, with price becoming increasingly important when considering major banks, too.
According to the survey, which asked brokers about their experiences using lenders over the month of June, 73 per cent said “product pricing” was the primary reason they recommended non-majors (up from 69 per cent the month before).
When it came to key drivers for recommending a major bank for their clients, brokers responding to Momentum Intelligence’s survey said that their ability to meet “client circumstances” was the most important consideration. The proportion of brokers choosing this reason fell over the month, however, dropping from 68 per cent to 63 per cent.
Indeed, “product pricing” overtook “turnaround times” as the second most common determinant when recommending a major bank — with 41 per cent stating this was the primary reason they recommended a big four bank to their clients. This was 9 percentage points higher than in May (when it was 32 per cent).
“Turnaround times” were only a primary consideration for 33 per cent of brokers using major banks, with 38 per cent of brokers stating this was a primary driver for choosing non-majors, too.
The increasing weight placed on home loan pricing comes as competition heats up in a rising interest rate environment.
After the Reserve Bank of Australia (RBA) increased the official cash rate for the first time in over 11 years in May, all four major banks announced they would be passing on the full 35-bp hike to borrowers on variable interest rates.
The majors raised variable interest rates again in June, after the RBA rolled out a bumper 50-bp hike, the largest increase to the rate in 22 years.
Several non-majors also announced they would be increasing rates in line with the RBA movement, too, with most standard variable rates surpassing 5.10 per cent in June (however, sizeable discounts apply).
Speaking about the trend, Momentum Intelligence director Michael Johnson commented “With interest rates increasing, brokers are constantly on the lookout for which lenders have the best rates available.
“We’re seeing many brokers starting to choose the big four because of their interest rates, rather than necessarily for client circumstances.
“We expect to see this continue to grow in importance each month as the RBA continues to steady the tide of inflation impacting Australia.
“It will be critical for brokers to stay abreast of these rate changes but also to keep an eye on turnaround times and client experience to make sure they don’t simply look at the sharpest rates — particularly if a lender’s offering is popular among other broker customers too. In this case, we could see some changes to the current SLA environment.”
[Related: Turnarounds take back seat following stabilisation]
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