First home buyers the most likely to use a mortgage adviser

FAMNZ’s Consumer Access to Mortgages 2024 report shows that while 35% of borrowers used a mortgage adviser the last time they took out a mortgage, this increased to 46% over the past 12 months to October/

First home buyers have been at the front of the queue, with 59% using this channel over the past year instead of approaching banks directly.

While owner-occupiers have been less likely to work with mortgage advisers, they are increasingly moving toward the channel, with 40% using a mortgage advisers. Investors have been relatively steady at 32%.

About 12% of those surveyed secured or refinanced their mortgages in the past 12 months.

However, the research found almost 37% or two in five of the 1,000 consumers surveyed for the report say their financial situation worsened in the past 12 months, including 7%  who believe it is “significantly worse”.

The survey indicates that almost 59%, or three in five mortgage holders, have repayments greater than 30% of their income and may be experiencing mortgage stress.

Refinancing has been an option for borrowers looking to extract equity or reduce their interest rates by using a new lender.

One in five, or 20%, of mortgage holders have already refinanced. An even greater 26% are actively considering refinancing.

However, 16% of borrowers can be classified as “mortgage prisoners” as they believe they will be unable to refinance due to new servicing requirements triggered by interest rates or other financial circumstances, the report says. For those borrowers one in four, or 27%, can be considered mortgage prisoners.

Although some borrowers are feeling mortgage pain, 18% of those surveyed are looking to secure their first mortgage in the next two years.

The majority of mortgages – more than four in five – already taken out of the past 12 months have been used for an owner-occupied house, which includes buyers purchasing their first or subsequent primary residence.

Of those who did not use a mortgage adviser, the majority applied online directly with their lender. Less than 20% of those who secured a mortgage applied directly at a bank branch.

The report, conducted in partnership with Agile Market Intelligence, revealed a staggering 22% of Kiwis are “not familiar at all” with the services mortgage advisers provide.

Those not familiar with the mortgage advice channel have a neutral or in some cases negative perception of mortgage advisers. This is a clear contrast to those who are familiar and have a positive perception.

Challenging these misconceptions is essential for market growth, Michael Johnson, Agile Market Intelligence director says.   

“We need to prioritise educating consumers so that they can recognise the value mortgage advisers can bring to them.”

The New Zealand report comes on the back of its parent, the Finance Brokers Association of Australia’s (FBAA), running a similar Australian survey started in 2019. The 1,000 consumers who took part completed the online, self-accessed quantitative survey.

Leigh Hodgetts, FAMNZ New Zealand country manager says the report’s findings highlight the growth of the industry in the past year, particularly with those taking their first step into a property.

“This emphasises the critical role advisers play in helping first time buyers navigate the mortgage market and demystify the application process, but it also sends a message that this is a market that advisers should reach out to more,” she says.

In the study, borrowers were asked to rate their overall home loan experience to show which channels have the highest level of satisfaction. About 87% of borrowers who used mortgage advisers were satisfied with their experience, compared to 80% who used online or bank direct applications.

Borrowers also have a higher level of trust in their mortgage adviser (86%) than bank representatives (81%) they might deal with.

While only 35% of mortgage borrows surveyed used a mortgage adviser for their most recent application, 44% say they will choose to use an adviser in their next transaction.

Customer loyalty for future transactions across both the mortgage advice and bank channels sits at 73%, indicating that 73% of borrowers from each channel would return to that channel.

Interestingly, the majority of people seeking a mortgage would speak directly with their mortgage adviser rather than researching options online first.

Close to one in two, or 49%, future first-time borrowers are likely to choose a mortgage adviser, with greater levels of younger people likely to choose a mortgage adviser over the bank direct channel.

Interestingly, female consumers have significantly higher levels of mortgage adviser preference (56%) compared to male consumers (41%). This could infer that male consumers are less likely to ask for professional advice and instead conduct their own research to choose a lender, the report says.

With greater levels of mortgage advice preference in younger generations, this highlights an opportunity for the channel to grow its footprint as these consumers move into their prime earning years and have the opportunity to purchase a home or investment property, Hodgetts says. 

“This reinforces a mortgage adviser’s value in guiding their clients through the process so they can save time and money and make the right decisions.

“It is promising that close to one in two future first-time borrowers say they will use an adviser if they were to take out a mortgage instead of applying directly with a bank or lender, and our industry must continue to help consumers understand the benefits.”

She says as the market grows there will be more pressure on the industry from regulators, which is why FAMNZ is working to lift standards and provide better professional development specifically for finance and mortgage advisers.

Hodgetts says there is much opportunity for the industry but it must be remembered that advisers’ interests are directly linked to the best interests of consumers, and as trust is built, the market will keep growing.