Rate cuts, AI and wage growth set to impact brokers in 2025: LMG

• Broker demand will reach a new high.
• Wage growth will boost market confidence.
• AI use among brokers will increase.
• Rate cuts will give borrowers relief.
• Commercial lending rivalry will grow.
• Property prices will remain stable.
• Cyber threat risks will rise.
• Brokers will focus more on client education.

David McQueen, CEO of Loan Market, said brokers need to embrace challenges this year.

“With more Australians than ever relying on brokers for lending solutions, it’s clear our industry is no longer just a convenient option – it’s the trusted path to better outcomes,” he said.

“This growing reliance is a testament to the value brokers bring in navigating complexity and delivering tailored advice. But with opportunity comes responsibility.

“From harnessing technology like AI to fostering financial literacy and adapting to market shifts, the brokers who lean into these challenges will thrive.”

More Australians will use brokers

A record 74.6 per cent of all new home loans were written by mortgage brokers in the three months to September 2024, according to the Mortgage and Finance Association of Australia (MFAA).

LMG expects that to increase in 2025, with eight in 10 would-be buyers turning to brokers for lending options.

The trend is partly being driven by bank branch closures, LMG noted, and will continue as rate relief increases market confidence, leading more consumers to seek out brokers.

LMG executive chairman Sam White said he sees 2025 as a year of change: “With up to 80 per cent of Australians expected to work with a broker in the coming year, it’s clear we’re in the middle of a major shake-up in financial services.”

Market confidence to rise

Strong employment rates will help support housing demand while improving wage growth will give home buyers a boost, LMG foresees.

Wage growth should allow more consumers to save for a deposit and manage mortgage repayments, especially as Millennials, now entering their peak earning years, dominate the home-buying market.

LMG predicts that these positive factors could be partially offset by inflation, which will keep costs high across the housing sector. While inflation may ease, its impact will still be felt, meaning home affordability will continue to be a challenge.

AI is a game changer for brokers

The group also views generative AI as an opportunity for tech-savvy brokers to provide sharper, more personalised advice.

AI can assess input from customer interviews to explore options for clients and draft recommendations, improving efficiency and freeing brokers to focus more on giving clients advice.

Open data can also be transformative, LMG noted, leading to less document-based interactions with clients and taking away labour-intensive processes for brokers.

Rate cuts will give relief

The aggregation and brokerage group expects the Reserve Bank of Australia (RBA) to make small, well-spaced interest rate cuts this year, with their timing and size dependent on how inflation behaves.

Cuts will give relief for borrowers, and brokers need to help clients navigate the evolving lending landscape, LMG added.

Commercial lending rivalry to rise

There will be strong competition for commercial loans by lenders in 2025, although LMG believes some major lenders may be selective in the types of transactions they are willing to fund.

That could lead to it becoming more expensive and harder for purchasers of commercial property to land a deal with a major institution.

There will also be ample funds that investors want to deploy into the commercial space, LMG noted. This extra capital will flow through to the market – albeit to a wider range of lenders.

LMG also expects to see a jump in the number of non-banks operating in the commercial space, which are rising in popularity with commercial brokers due to their ability to adapt products to the credit profiles of small-time investors and businesses.

Property prices will not dip

The Australian housing market showed signs of cooling at the end of 2024, though this varied significantly across different cities.

LMG believes this pattern is likely to continue in early 2025, with modest price growth or stability rather than major falls.

The property market in Perth, South-East Queensland, and Adelaide should continue to show strength, while markets that have already slowed, like Sydney and Melbourne, may stay flat until rate cuts begin.

Hobart and Canberra are likely to see minimal growth, the aggregator said.

Cyber threats to grow

Cyber security is growing in importance for brokers, with the number of AI-powered cyber attacks surging and leading to more sophisticated scamming attempts.

Brokers need to build out their cyber resilience and embrace AI as a major defence shield, too, LMG said.

The cyber security talent gap will remain a pressing issue, LMG noted, pushing companies to turn to managed security services and the automation of repetitive tasks to offset workforce shortages.

Educating clients will be crucial

Brokers need to keep their clients informed about the constantly evolving mortgage landscape to build trust and long-lasting client relationships.

“As we look ahead to 2025, there’s no doubt the Australian property market and lending landscape are set for some big changes,” White said.

“Having a clear view of what’s ahead is crucial when it comes to helping your clients make smart decisions, no matter where they’re at in their lending journey.”

[Related: Residential non-bank leaders outline forecasts for 2025]