The mortgage broking profession has boomed in Australia during the last fifteen years. From humble beginnings the industry has grown at a rate of knots over the past decade or more to a point at which there is currently over ten thousand brokers practicing throughout the country.
Despite this relatively large number – Australia has a population of barely twenty million people – the role of a mortgage broker is widely misunderstood. The home loan market in the land Down Under has been dominated by the Four Pillars banking system for decades. The four banks included in the system are Commonwealth Bank, ANZ, National Australia Bank, and Westpac. Although the Four Pillars system has only been officially in place since the 1990s the same four banks have shared the majority of home loans issued in Australia for many years prior to this.
Deregulation of the banking system opened the door for other financial institutions to offer mortgage products in Australia. While some of these lenders, namely smaller banks and building societies, already had an established network of branches through which they could sell their home loan products, other did not. The independent mortgage broker profession emerged to fill the gap and become the sales force for non-bank lenders that did not have a branch network available to them.
The role of mortgage brokers in Australia is therefore to offer home loan products from a variety of lenders that would otherwise not be able to market their products to the general public. Unlike large banks, such as the Four Pillars banks, brokers can offer their clients comparable home loans from different lenders, thereby helping to ensure that their clients apply for the most suitable product for their personal situation. Banks on the other hand, are restricted to offering their clients a small selection of home loan products from their own range.
Independent mortgage brokers often operate under the umbrella of an aggregator or a master franchise. Franchising is popular in Australia and the mortgage industry is awash with franchises that also operate as aggregators. This business structure ensures that the franchisees belong to a group that will have access to a wider range of lenders than an individual broker working alone could manage. Aggregators usually also offer training and support to their franchisees, helping ensure they remain professional and knowledgeable throughout their careers.
Mortgage brokers in Australia are also required to join either one of two professional bodies. They are the MFAA and the FBAA. Both of these bodies help to maintain professionalism within the industry by enforcing a code of conduct and taking disciplinary action where required. The name of the game for these bodies is to protect the public by helping to weed out any brokers that offer poor advice for the sake of earning fees.
In the wake of the credit crunch the Australian government has decreed that national regulation of the financial services industry is required. Previously each state has been responsible for such regulation. The national regulatory scheme will affect mortgage brokers and will help keep the integrity of the industry in tact as it will make it even more difficult for unscrupulous brokers to operate.
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