Mortgage values are cooling but a new buyer market is coming in hot

For many years, even during the pandemic, home buyers jostled at auctions, bidding above asking price, competing for properties that were more valuable than they have been in a long time.  

Now, homes are being pulled from the market by owners who are struggling to sell them at their asking price. It’s a messy market at the moment. 

Australian property prices have been dropping for six straight months, as consistently as interest rates have been rising. 

As central banks race to tame inflation, they are raising interest rates at the fastest pace in at least two decades — which has caused some housing-market carnage.

With transactions and mortgage values down, how can mortgage brokers ensure sustainability for their businesses?

It’s a different market, but it’s not all doom and gloom. There is good news. 

Having a strong customer pipeline, especially in a market like this, all comes down to how well a broker plans ahead. You have to know your target market and how to service them. 

We know that Australia’s Millennial generation is overtaking Baby Boomers as the main drivers of the nation’s economy. Millennials are the next borrower and buyer market. They currently make up 54.6 per cent of all homebuyers in 2022, according to the Australian Bureau of Statistics, and that's likely to increase.

Let’s replace the dated stereotype of ‘lazy’ or ‘entitled’ Millennials with Millennials who want financial stability, yet also prioritise efficiency. After all, they do have a steeper hill to climb to afford the same lifestyle as their parents. 

Millennial’s hyper-connectedness has shaped a unique perspective, transforming the way they consume, buy and work. Unlike previous generations, this group of digital natives aren’t blindly loyal to brands and companies for significant portions of their lives. Rather, they are much more likely to make a purchase decision based purely on whoever can get them the best deal.

If you consider the 70 per cent broker market share, couple this with the rise in digital connectivity, and consider the breadth of loan choices that the average broker can provide to savvy customers, this presents a lucrative opportunity to the brokerage industry. 

Millennials have got good jobs, and they want effective digital service as a bare minimum. 

Gone should be the days of sales people knocking on doors or even cold calling. Aligned with their desire for efficiency, Millennials expect to be able to transact digitally in all aspects of their lives.

Digital strategies are no longer just nice-to-have, they are non-negotiable. Millennials want simple user experiences, on demand service when they want it and digital communication with ease. 

They also love options. Online shopping behaviours extend to mortgages too. A one size fits all approach doesn’t cut it. Millennials want to be able to ‘shop around’ to find an option that takes into account their situation but in a way that saves time and hassle. 

We now welcome and service a new booming market of first home buyers. With Millennials shifting back in, more revenue is coming into the market with high mortgage figures.

Rising interest rates are having a clear impact on the types of loans that Millennials are seeking, with variable rate loans and split loans becoming popular. Split loans give borrowers a mix of certainty of a fixed rate and the flexibility of a variable rate. 

The confidence and optimism of the millennial market needs to be nurtured. With Millennials making up the market, it makes sense that these variable rates are becoming more attractive.

Demand for split home loans climbed from 7.67 per cent last year to 13.64 per cent this June. This trend will continue throughout the remainder of the year and into 2023 and home loan providers need to recognise the palatable options of variable and split loans for borrowers.  

Anny Le Wilson is chief revenue officer at home loans marketplace Joust. As CRO, Ms Le Wilson is charged with the sales and operations at Joust.  

She has specialised in the banking and finance industry for over 18 years from early beginnings in managing a broker firm, to holding senior and executive roles in specialised growth markets such as Asian banking and third-party broker origination. 

Her experience also extends to working with customers and businesses in various banking segments (personal, retail small business, business, professional services and corporate banking) across most of the major banks in Australia.