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Mortgage Choice chief executive officer Michael Russell has slammed comments suggesting the online revolution poses a threat to the broking industry.
Speaking to The Adviser, Mr Russell said brokers should not lose any sleep over these suggestions as the same comments were made 10 or 15 years ago and nothing has changed.
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“I think we all recall the decision made by the banks to close around 1,300 bank branches from 1990-1998, in part to reduce costs but in part in the belief that consumers wanted less face to face time. We soon discovered the latter to be incorrect and what we have seen since is a scramble to re-open bank branches and stock them with branch managers with appropriate lending discretions,” Mr Russell said.
“Also since this time, CBA's Homepath - once said to be a huge threat to brokers - has since closed, along with ANZ's One Direct & Virgin Money's online mortgage business.
“Yes, NAB have bucked this trend and recently launched UBank, however as someone who enjoys a punt I don't think I could get odds long enough to part with any of my hard-earned.
“While we can't deny that home buyers are now far better educated thanks to the richness of online home loan data, their buying habits have not and I believe will not, materially change when it comes to applying for a home loan.
“Not only is buying a property a monumental decision, the process has so many moving parts that home buyers are continuing to vote with their feet and transact on a face to face basis with a mortgage professional whom they trust. After all why wouldn't they? Face to face meetings at a time and place that suits them, their questions answered on the spot, their needs and goals matched with a home loan from an extensive panel of lenders and even assistance in interpreting lender jargon and submitting their loan application.
Consider the alternative; presently only around 25 per cent of online applications are conditionally approved the first time around. While lenders are continuing to enhance their data capture capacity, the fact remains that vanilla home loans are not the norm! What generally follows is still in the main a clunky manual process that brokers undertake to shield their customers.
“Any online application will surely expose customers to this process and leave them with a voice on the other end of a telephone attempting to answer their questions pre and post application. Let's be honest this doesn't sound appealing, particularly when the first thing they may hear is a pre-recorded numerical menu. Why would one bother when the alternative is so attractive?
“Price you ask? Homepath, ANZ One Direct and Virgin Mortgages offered a super sharp rate but apparently that wasn't enough.
“Given absolutely nothing has changed in the last 10-15 years, why all of a sudden do we think consumers will shift to applying for and fulfilling their mortgages online?
“I haven't seen any evidence to substantiate this to date.”
But Mr Russell said brokers shouldn’t just take his word for it. The chief executive points to recent research by IbisWorld, which suggests mortgage brokers will originate up to 50 per cent of mortgages nationally by 2016.
“Taking out a loan to finance a house is probably the biggest financial decision an individual will make in their lifetime. For this reason, consumers prefer talking to an expert about taking out the most appropriate loan given their circumstances and needs,” the report read.
“The provision of services through the internet will continue to be a high cost channel. Contributing to this lack of take up of online broking services is the fact that people do not feel comfortable filling in online forms regarding such a monumental decision.”
Mr Russell said the research supports the idea that the buying habits of mortgage holders is unlikely to change any time soon.
“The demand for professional face to face mortgage advice has never been greater than in today's competitive mortgage market,” he said.
