Mortgage brokers faced tough year while some have quit with 2023 still expected to be challenging

The number of new residential mortgages has fallen in New Zealand as interest rates rise. Photo /123RF

Mortgage brokers have not escaped the aftermath of falling house sales with some exiting the industry as continuing headwinds hit the property market.

Last year was a game of two halves for brokers NZME spoke to however most agreed this year would be tough and similar to the challenges faced in the last 12 months.

Mobile Mortgage Advisor Laura Carter from The Mortgage Girls said she had a 15 per cent decrease in settled loans last year compared to the one before.

‘‘The rising rates and threat of recession and falling house prices scared off a lot of people. There was more panic than what we saw going into the first Covid lockdown. The biggest challenges we faced were limited options for first home buyers, increasing sensitivity rates meant lower borrowing and trying to portray a positive message about the housing market to keep customers’ confidence high in purchasing homes when the media made it very doom and gloom.’'

It did a lot more new business in 2021 while in 2022 it provided a lot more advice around existing mortgages and structures/refixes and so on.

‘‘We were a little bit quieter but felt just as busy due to the different types of work we have been doing. When rates are falling people will lock in their rates online as it’s ‘a good deal’ when rates are increasing they seek out advice more often to get the best deal for them.’'

She said in her view this year would be similar to 2022.

‘‘There will be people taking advantage of lower house prices and first-home buyers are and have always been pretty active, I have noticed a lot of first-home buyers [in 2022] had realistic expectations whereas the last couple of years they wanted the most they could borrow and the best house they could find.’'

Carter had heard of a few people reducing staff numbers or leaving the industry.

‘‘This is not wholly because of the property market though, we have very tough and expensive regulation requirements which we have been working through the last few years, with the end date to have everything sorted by March 2023. I think because of this more advisers are considering changes to their business more so than the property market.’'

Sam Burnett from Mortgage Supply Co. Photo / Supplied

Sam Burnett from Mortgage Supply Co said overall lending across the industry was down but he had experienced a significant increase on successfully funded loans in 2022- up 50 per cent compared to 2021.

‘‘This was due to a combination of more borrowers seeking assistance, and strategic additions to my team to assist with this. For us 2022 has provided an opportunity to give advice to a greater number of clients, and we find people are seeking and valuing this advice as the market has hardened.’'

The biggest challenges had been the implementation of the Credit Contracts and Consumer Finance Act and increases in interest rates.

‘‘I’m finding there is less demand for construction loans - with the downward shift in existing property values, and well-publicised increases to build costs, clients are more commonly seeking existing properties rather than paying what they believe is a premium to build new.

‘‘I believe this will balance out over time, but for now, I see less demand for construction through 2023.’'

Changes to the Kāinga Ora first home offerings in tandem with lower house prices could mean opportunities for first-home buyers.

‘‘We work a lot with first-home buyers and I believe 2023 will be a busier year for us in this space.’'

Burnett said the requirement to complete qualifications by March 2023 may see a few choose to leave the industry but he didn’t think it would be a large number.

Mortgage Centre principal advisor Jenny Zhou. Photo / Supplied

The Mortgage Centre principal advisor Jenny Zhou said despite a significant drop in overall mortgage activities nationwide its market share had increased with a 98 per cent approval rate.

She said it did not think market activities overall would improve in 2023 in terms of people buying and building houses.

‘‘However, we can see that the banks willingness to lend has improved, and our current labour market remains strong which means higher household income and stronger employment stability. It hopefully helps with market activities especially once the interest rates peak and the inflation is under control.’'

Zhou said they were humbled by its support from our local customers and intermediaries ‘‘, especially in the current market where some advisors have chosen to leave the industry’'.

A Kiwibank spokesperson said it had home lending specialists although it does partner with accredited advisers.

Over the next 12 months, it was looking to increase the number of advisers it worked with.

Advisers were paid a commission for services provided to customers.

‘‘For customers, going to a mortgage adviser reduces the need to speak to multiple banks to determine best-suited products and services for them. However, the advantage of dealing with their existing bank is that there will already be home loan specialists with in-depth understanding of the customer’s financial history who can support them through every step of their journey.’'

‘‘While we don’t have exact numbers, we know the adviser channel is becoming increasingly popular with customers, which is why we are growing the number of advisers we work with. We know that in the UK and Australia, more than 60% of lending is originated through adviser channels.’'

They said in absolute terms Kiwibank had seen a decrease of first-home buyers and this was to be expected noting the contraction of the market over the last 12 months.

An ANZ spokeswoman said it had home loan coaches and it did provide commissions to external mortgage advisers or brokers when they arrange a customer’s home loan.

‘‘At the moment the housing market is being impacted by the current economic environment, with interest rate increases and the slowing of house sales being some of the contributing factors. Generally, when the housing market slows home loan applications tend to fall as well.’’

BNZ specialist banking general manager Adam Ward said it works with a range of external mortgage brokers, and, like other banks, we pay them a commission when customers have engaged their services and selected BNZ for their home loan.

BNZ pays brokers both an upfront commission and a trial commission to support the ongoing relationship between the customer, broker and BNZ.

‘‘We offer all customers the same level of service and interest rates regardless of whether they’re working with us directly or through an external broker.

‘‘Total home lending has slowed compared to last year, which isn’t unexpected in the current economic environment where cost of living and interest rates are top of mind for New Zealanders.’'