What is driving lender choice as property market heats up

  • By Christine St Anne

Latest industry data has revealed rising intention to take out a mortgage, but as demand for housing picks up, lenders need to overcome a number of sticking points if they are to succeed in winning market share. 

RFi Group’s latest Mortgage Acquisition Report is based on based on publicly available data and RFi Group’s Australian Mortgage Council (AMC) and XPRT monthly tracking study. AMC is a quarterly survey of over 2,000  nationally representative mortgage borrowers. XPRT is a one-of-a-kind monthly survey of over 5,250 nationally representative consumers. 

Latest ABS data has revealed that there has been a surge in lending commitments, especially for owner occupied loans, underpinned by first home buyers.

“Demand for housing has really skyrocketed. Over the last seven years it has never been this high. Borrowers have really taken up the opportunity from the historical low interest rates to get into the market” RFi Group lead analyst Nitish Bhatt said. 

In fact, RFi Group data also revealed that over two million Australians will look to take out a mortgage in the next 12 months. 

Getting the processes right 

While the outlook for the market remains robust, the RFi Group report highlights a number of key pain points that lenders will need to overcome if they are to be successful in grabbing a slice of this two million market. 

For Bhatt, it is crucial that lenders tackle any sticky points in the onboarding process. 

“The onboarding process has such a big impact on ongoing satisfaction,” Bhatt said.

“If you don’t get this process right, it's going to mean that down the track, your customers are going to be less satisfied with you. 

Lenders really need to nail this strategy,” he said.

RFi Group data revealed that 77 per cent of borrowers are currently highly satisfied with their application process, were also highly satisfied their loan. 

In stark contrast less than 10 per cent of borrowers who were unsatisfied or neutral about their application process indicate high levels of satisfaction with their loan. 

Equally important is addressing broker frustrations with the onboarding process. 

“It is especially important for lenders to get the onboarding process right for broker originated customers,” Bhatt said.

Brokers are continuing to grow their presence in the market, with publicly available data revealing that currently more than 50 per cent of new residential loans are third party (broker) originated for banks. 

“Borrowers also typically have a stronger relationship with their broker than their lender”, Bhatt adds 

In fact, RFI Group data highlights that almost 60 per cent of borrowers would go back to their broker rather than their lender when deciding to take out another loan 

“Therefore, it is imperative that lenders have good relationships and leverage their ties with brokers as now, more than ever, it really pays to be in brokers good books,” Bhatt added.

According to RFi Group research what brokers want from lenders is not surprising. Fast turnaround times, flexible credit decisioning and efficient loan processes. 

But another key strategy lenders should adopt is providing brokers priority approvals which may also help improve perception of fast turnaround times. 

“A lot of brokers feel like they're not being looked after. Giving brokers that little bit of priority will make them feel like they are ahead of the queue. That will go a long way in improving the relationship between lender and broker,” Bhatt said.  

Build it and they will come 

The health pandemic has spurred a greater shift to digital banking and the appeal is no different in the lending market. 

However, RFi Group data revealed the importance of the omnichannel experience. 

“We are seeing appetite growing for digital applications for mortgages and it is consistent across all age groups,” Bhatt said.

“As a result, the proportion of borrowers that applied online that would prefer to apply online again for a future loan is increasing over time. While the opposite trend is unfolding for direct face-to-face channels “

Indeed, this finding is consistent with previous RFi Group research which highlights that the “digital mortgage” could become a reality

In light of this trend, Bhatt said that lenders therefore need to understand the barriers to online lending. 

RFi Group data highlights that while online applications appealed to consumers, the primary barriers to home loan online applications is wanting to speak to an expert in person and negotiating rates.