Disruption and Modernization in the Mortgage Broking Sector

Mortgage brokers in New Zealand have been periodically disrupted, typically by large scale crashes in the property sector that radically reduce the amount of business they getting, and in the case of the past 6 years they have been disrupted by new regulations that have made it much harder to gain  qualifications and become registered as a mortgage broker.

The mortgage brokers in Christchurch today have a lot of new individuals compared to 10 years ago, and largely the  disruption of the past 7 to 8 years has worked very well for the residential consumer.

There is a lot more disruption that is going to happen, driven in a large part buy the development of online markets and services. A big disruption happening right under our noses is caused by the capability of a few large mortgage broking companies to completely  own all new business that originates from a customer doing a Google search online. There is a massive trend around the world and the New Zealand customers are becoming more and more comfortable  with finding new suppliers for Services online, and in New Zealand there are over 9000 searches a month for mortgage brokers. These 9000 searches obviously do not represent 9000 you mortgages, but they do represent a high proportion of the customers that are looking for a new mortgage broker or lender,  and almost all of this new business ends up with the few small companies.

These companies probably represent less than 10% of all the mortgage brokers in New Zealand, but they are winning around 95% of all the Internet generated with business. The remaining 90% are well aware that they are getting very little business through their own website, but they do not fully understand the extent to which all this business is siphoned off buy the lucky few.

There is a potential disruption looming for these lucky few, and it is based around competent SEO businesses that are able to build a quality website and get it very highly ranked and therefore attract new business that would be otherwise going to these lucky few.  These SEO businesses could potentially siphon off a very large percentage of new business, and with  the right mobile apps and back and applications they can deliver this traffic in real time to the mobile phones of the remainder of the mortgage brokers in Canterbury. They can in fact deliver the equivalent of a Robinhood service, taking leads from the rich and forwarding them to the poor.

The New Zealand Mortgage Broking Sector

Mortgage brokers Taranaki play a vital role in The New Zealand economy, as they are responsible for around 40% of all the new mortgages written each year. Mortgages and the housing market are the lifeblood of the New Zealand economy whether we like it or not, and major political decisions are made around the fact that the property market must continue to increase virtually at all costs to protect the investments all the home owners and landlords.

There are probably around 200 mortgage broking companies in New Zealand, ranging from small independent one person companies to large companies employing mortgage brokers from all over the country. While mortgage brokers are vital for all sectors of the New Zealand property market, and for that matter other sectors requiring mortgages such as agriculture, fishing, forestry etc, the vast bulk of the mortgage broking community is focused on the residential housing market. While there is a continuum all of the types of operations carried out by the mortgage broking sector, most mortgage brokers fall in one of two groups.

The first group is comprised largely of small independent operators, and this group tends to operate in a traditional manner in that they find new business through referrals from previous clients and real estate agents and developers, and also through repeat business from previous clients. They can be servicing the investor market, which can be very lucrative because of the higher frequency of repeat business, and they can be serving the residential homeowners market. They will generally be focusing on providing excellent service, simply because high quality referrals and repeat business is their life blood. Experienced brokers with very good networks can flourish in this environment, but it is generally hard work but also very satisfying.

The second group is comprised largely of a small group large mortgage broking companies, and they tend to operate Nationwide or at least region-wide and are very heavily focused on winning business over the Internet. The handful of companies that are succeeding in this market have managed to get their Internet search rankings up to number one or two or three on the Google page one, and they are savvy enough to realise that any investment they make in their website and in driving their rankings will be massively rewarded by the sheer volume of new business that will be showered on them. To put it bluntly, any company that does not appear on page one of a Google search is going to be sharing only about 5% of the total business on offer with every other company that does not appear on page 1. The small group of companies that are ranking 1 2 and 3 on page 1 are between them going to be sharing around 60-70% of all new business arriving over the Internet.

In 2017 this new business is truly massive, and in any one month around 10,000 Google searches are made for mortgage brokers in Wanganui. This is indeed the new Marketplace and it is growing exponentially as more and more New Zealanders are completely comfortable with doing all their searching and dealing over the Internet.

The Typical Mortgage Broker: A Day In The Life

While the New Zealand mortgage broker market is dominated by a few large companies, where the work is farmed out to the individual mortgage brokers in the company, the vast majority of mortgage brokers in Hawke’s Bay operate out of small businesses and must find their own clients.

The career is not for the faint hearted, as the brokers will need to work continuously to make certain they have new clients lined up at all times, as the only way for independent brokers to get paid as by commission once the loan has been paid out to the client. This means that all of the work that the broker does (including finding new clients, providing the professional advice and assistance, negotiating on their behalf for a good mortgage which will also include developing the application to the required level and then following up with the bank) is not paid for until the very end of the project.

These independent brokers need to pay close attention to their cash flow, and in most cases these brokers operate out of their family home. The problem that all brokers have was that only a proportion of the applicants for loans who come to them will end up qualifying for the mortgage so what, and it looks like the proportion is generally around about 30%. This means that 70% of the  potential clients that brokers will talk to will not qualify, and therefore it is important that the broker can identify these clients as quickly as possible in the process so they don’t waste any effort.

At the same time the broker needs to think in the long term, and there will be a bunch of the clients in the 70% group who may qualify down the track if they follow  the professional advice given to them by the broker such as rearranging their finances or finding some sort of interim paid employment. In these cases the broker will not want to discard the client but instead put them on bring up as eventually the client will be able to qualify  for a mortgage, and the broker will want to make sure that they are the person providing that mortgage.

While the small handful of large  mortgage broking companies will find new business piling in through the door simply because of either their reputation or because of their very high ranking in Google searches, most of the remaining mortgage brokers in Bay of Plenty will have to go through the process on a daily basis of finding new clients and sifting and sorting them to find those that are most likely to succeed with their loan application. These independent mortgage brokers are an ideal target market for any service that can identify the clients that are most likely to succeed, and then forward these leads to the mortgage broker in real time. Such a service is correctly deployed and properly scaled could be somewhat disruptive in this market.

Mortgages for Property Investors

You are around 1.6 million households of New Zealand, and all these 63 % for around 1 million own their own home. About 14% of homeowners or 140000 alone more than one property, although not  all of these will be property investors.

However there are still a large number of property investors in New Zealand, and while most will be classified as long term buy and hold, there will be still a number of new entrants into the market and there will be a number of existing investors where you are always heading to or replacing their portfolio.

A small percentage and comparison of property investors are actual property developers, and the reason this is a small percentage of simply that property development is a very risky enterprise. A property developer needs to acquire land, do the upfront planning and Gain can sense and then build the development, and then finally they must of course sell the property they have developed. The real risk for developers is that they can barely miscalculate the difficulty of gaining consent or of meeting engineering requirements, and they can Miss calculate the absolute difficulty will cost of the development and they may badly overestimate the market demand. Often for developers there is a macro event in the economy that badly impacts on them such as a financial crash that may remove a lot of potential buyers of the year property.

For mortgage brokers in Southland the difference between the long term buy and hold and the much more shorter term property developers is extreme, as the long-term buy-and-hold investor is most probably going to want a stable long term mortgage as low and interest rate as possible. The developer by contrast is most likely first and foremost to just need short-term financing for the duration of The Project, and would actually not be overly concerned about a high interest rate as long as the financing meets all the needs of The Project up to the point of sales. Mortgage brokers in Otago need to be able to live be competent in all areas of the market, but we are out for a long term buy and hold the mortgage and the mortgage application process is very similar as for the ordinary residential buyer, for developers the mortgage and mortgage application process may not even be with a bank that may instead be with a non Bank lender. In both cases it will be necessary for the mortgage broker they have a good Insiders understanding of the investor’s business and financial status.

Re Roofing Of Older Houses

It’s an interesting observation that in a street of old houses most of the houses end up getting new roofs within a fairly short space of time. In general old houses can expect to have leaky and problem roofs, and so in a street full of old houses most of the homeowners well have been considering putting a new roof on for some time.

It only takes one homeowner to take the plunge and get a new roof installed, at which time everyone else in the street can see how attractive and tidy the roof locks, and also how phenomenally weatherproof the new roof and guttering is. The new roof would have taken 7 to 10 days to install, and during this time everyone in the street will have witnessed all of the roof strengthening work and the high quality of the roofing iron and routing attachment.

It’s sometime after the roof has been completed there will be another heavy storm with wind and rain, and everyone in the street at that stage will be reminded that they have a leaky roof and almost in every case a flimsy roof. The whole street will be very envious of the homeowner with some brand new worth.

This is a key source of business for roofing companies, because it is very likely that the homeowner we’ll be bragging to their neighbours about all the good work that was done including all the modern insulation installed in the ceiling, and they will be bragging about how warm and dry and safe their house now feels. The neighbours will obviously have a lot of confidence in the roofing Wellington provides, and the roofing company will get a lot more orders for new roofs in the same street. It obviously pays for the roofing company to do a very good job on the first house on the street, and to make sure that the homeowner is very happy with the quality of the work and the performance of the workers on site.

A good roofing company can end up with many months of new work from other houses on the street, as they become the go to company for all the neighbours who are otherwise confused as to which roofing company to choose. The First Home Owner to take the step of getting a new roof on their house send some message to all the other homeowners that this work can be done and here’s the company that you do it with.

There is a huge advantage for an older house getting a new long run steel roof, as these roofs are generally colour coated and mounted in a way which means that they are strong and also add overall strength to the roof. Steel roofs are a lot lighter then tile roofs, and are a lot more robust in wild storms, and when good insulation is installed in the ceiling then the roofs are not even loud during a heavy rainstorm.

Mankind’s Impact On Climate

The temperature of our planet is steadily increasing due to the ever increasing accumulation of CO2 as a direct result of the burning of fossil fuels over the last 120 years. Fossil fuels have enabled the huge growth and productivity in our planets history, which has enabled the massive improvements in living standards right across the globe.

The vast increase in manufacturing capability driven by a large number of Titans of industry is the direct result all the efforts of hundreds of thousands if not millions of very clever Engineers and capitalists over the past century and a half.

Sadly  the efforts of all of these clever and hardworking people will result in near catastrophic climate change if the growth in fossil fuel use remains unchecked. Ironically it may be that a small handful of individuals are the direct cause of fossil fuels being stopped in their tracks.

The individual likely to have the most impact is Elon Musk,  the CEO of Tesla. Musk is an exceptional visionary with exceptional Engineering and marketing skills and with an exceptional ability to raise capital.

He has  correctly forecast the technology and economic conversion necessary for electric vehicles, solar power and battery storage, and through Tesla has arrived at 2017  in an ideal position to be able to massively disrupt the way the world travels and sources and uses power.

In particular he has correctly forecast that AI technology will make fully autonomous driving absolutely practical in one to two years, and he has made certain that he has an affordable and highly desirable vehicle  ready for manufacturing at scale  and used for transport as a service at least two to three years ahead of any other vehicle manufacturer.

Musk through Tesla has forced  all vehicle manufacturers to rapidly put together an electric vehicle program and an autonomous driving program, probably at least 10  or even 20 years ahead of when they otherwise would have if Elon Musk had not appeared on the scene.

The long term impact of Tesla will most probably mean that climate change is kept to the most optimistic levels forecast in the Paris climate agreement, and Musk will probably go down  in history as the man who saved our planet.