A second set of eyes

Genworth’s March Streets Ahead report shows the percentage of potential borrowers seeking mortgage broker services is growing. Do you expect this to continue?

If consumer confidence continues to improve across the board, I expect to see broker market share continue to grow.

I think brokers are playing a more prominent role in the home loan process. Today, more than ever before, they understand their target market and their borrowers’ needs.

They know which buyers they should be focusing on and they are doing everything they can to attract and retain these borrowers. In addition, the industry is doing more to support the third party distribution channel in their role.

Aggregators and lenders are providing brokers with a lot more support, which is allowing them to expand their reach and improve their lead generation skills.

The Streets Ahead report also found broker usage is highest among those earning between $50,000 and $150,000. What do you attribute this to?

The options for people earning under $50,000 are limited; those earning between $50,000 and $150,000 have more options available to them.

If you then consider that the mortgage market is incredibly complex and confusing, especially given the level of lender competition at the moment, it is reasonable to expect borrowers would seek out the advice and guidance of a finance professional.

People earning a good salary will go to a broker because [the broker] can advise them on how to package a loan in the appropriate way and guide them on which product and lender is best for their needs, both now and into the future.

First home buyer confidence has fallen considerably – why is that?

It is true that first home buyer (FHB) confidence has dropped over the last six months. In fact, Genworth’s Streets Ahead report found FHB confidence dropped from 98.5 in September 2012 to 85.9 in March this year – a 12.6 per cent fall.

When we look at the factors driving this fall, mortgage stress was the main reason. Overall, 41 per cent of FHBs said they expected to have difficulty meeting their mortgage repayments – up from 19 per cent six months prior.

Perhaps of even greater interest, however, is the percentage of first home buyers who believe now is a good time to buy.

In the September 2012 Streets Ahead report, 54 per cent of FHB respondents said now was a good time to buy. In the six months to March 2013, that percentage dropped to 49 per cent.

And while one in two still believes now is a good time to buy, that is a considerable fall in such a short time.

I believe the first home buyer grants help add an extra layer of confidence to these homebuyers and, in NSW and Queensland, with the first home buyer grant for established properties now removed, confidence in these markets isn’t as high as it used to be.

Our research shows us that a majority of first home buyers want to buy an existing property and now, in NSW and Queensland, they aren’t receiving any help from the government to do this. I think we need to help find ways to get first home buyers into homes.

Over the past few years, people [have been] deleveraging more, and while some recent data suggests sentiment may be improving, the fact is we have seen 200 basis points cut from the cash rate since 2011.

Despite this, sentiment is still quite low – especially amongst first home buyers.

I expect to see investors dominating the market … the market is favouring them at the moment. Rents are increasing while house value growth is benign, and data from the Australian Bureau of Statistics shows investor loans are growing at more than double the rate of owner-occupier loans.

The investor market is one brokers should concentrate on. While our research suggests just 20 per cent of investors consider using a mortgage broker, I believe the two really go hand in hand.

Brokers can help investors, who are historically time-poor, to find the right loan package for their needs and goals, both today and into the future.

Looking beyond investors, I think the refinance market is also interesting. We are seeing an increasing amount of homeowners looking to refinance and there are several reasons for this.

The first is low rates – interest rates are now sitting at historic lows. In addition, lender competition is heating up. There is a lot of movement around fixed and variable rates – as such, there are a lot of attractive offers out there.

What does the immediate future hold for Genworth?

Genworth will continue to work with the broker industry in any way possible.

We understand just how important the third party distribution channel is. Broker market share is currently sitting at 43 per cent and while they are not our direct customers, brokers do play an integral role in our business.

As such, Genworth has recently appointed a broker segment leader – Michelle Ewens – whose sole focus will be the broker market.

Ms Ewens will be responsible for forming strategic initiatives with Genworth and the broker channel. She will look at the various ways Genworth can add value to this channel, through education, training, or other growth opportunities.

We are constantly researching and we are always happy to share our results with the government, with the regulator, with the lenders, with the aggregators and with the brokers.