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 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.