Mortgage Brokers and Housing Bubbles

Mortgage brokers play a vital role in the housing economy in New Zealand, by providing an expert bridge between customers and banks and other lenders. Brokers handle about 40% of all the mortgages written in New Zealand, and most of the business they generate comes from customers who otherwise would have difficulty gaining a mortgage or at least getting a good deal.

Anna Thatcher, mortgage broker

Anna Thatcher, mortgage broker

The demand for mortgage brokers Lower Hutt rises and falls with the demand for houses, but they find a lot of new business when the housing market is booming. During normal times the housing market is driven simply by the demand from first time buyers wanting to own their first home. They are buying off existing householders who are wanting to upgrade or change their house.

In a housing boom property investors become very active, because they see that there is good money to be made if they can buy a property and hold onto it for even a short time. During the housing boom prices are rising, sometimes dramatically, and so this reflects back to the first home buyers who steadily find it more and more difficult to buy their first house. Well other factors are involved it is the property investors who are changing their behaviour, and the mortgage broking sector is vitally important. Property investors are heavy users of mortgage brokers for a number of reasons, including convenience and the focus on a good deal. However for a lot of investors it takes a good mortgage broker to actually organise a good mortgage for them, because otherwise it will be too complex and difficult.

The mortgage brokers flock to the property investment market because it is easy money if they can win business as property investment business generally results in a lot of repeat business and referrals. What tends to happen is they get very creative for their clients, and enable their clients to purchase more properties at a higher price than otherwise would be possible. This is great for the mortgage broker, who is paid by commission based on the size of the loan, but it is not necessarily good for many property investors who find that the mortgage broker has exaggerated their ability to make the loan payments.

For all that a lot of new investors get into the market during property bubbles, and for many of them their loans are based on exaggerated claims by the mortgage broker. The net effect is that property prices rise even further, and the housing bubble carries on. If mortgage brokers Upper Hutt were to stop operating then the current housing bubble would be stopped in its tracks, but of course this will never happen.

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Mortgage Broking Opportunities in New Zealand

The residential mortgage broking industry in NZ is largely divided up into two segments, a small group of large franchises and a large group of small independent operators.

Large franchises have without exception invested heavily in the marketing of their operation, including Print Media, television, radio and online marketing, with the sole aim to generate as much new business as possible. These companies rely to a large extent on new business from residential customers and on repeat business from investors, and unfortunately the new residential customers will not necessarily be treated that well because franchises understand that there was always new business coming in through the door if they have run their marketing campaign effectively.

Lizzy Tan, independent mortgage broker

In 2017 the single most effective way to generate new business has to be ranking #1 in Google search results for the main mortgage broking keywords. While this will require a very significant initial and ongoing investment in the franchise website and in the SEO necessary to gain the ranking, the return on investment can be enormous. In general for all Google searches around 33% of all Internet traffic goes to search result #1, around 18% to #2 and around 12% to #3. Any other mortgage broking website on page 2 and beyond will be sharing about 1% of the total traffic with all the remaining mortgage brokers Southland.

The decision by any new franchise to spend the money to get themselves ranked highly is a brave decision, because SEO is not an exact science and it is always very expensive. The marketplace is probably littered with many pretenders who have spent a lot of money but haven’t quite made it.

This does however present a unique opportunity or companies with specialist SEO skills to rank their own website within the top 3, and then to direct any traffic from their website to client mortgage brokers Otago who are otherwise not seeing any traffic at all from Internet. The challenge for such a company will be to deliver the leads as efficiently and as quickly as possible and to get paid for them in as simple a way as possible, but modern technology and modern applications mean that this can easily be done using online services and smartphones.

The end result is that such a company can pluck leads from under the noses of the highly ranking large franchises, and pass these on to independent mortgage brokers at a fairly healthy price. The value of these leads is very high for the mortgage broker given that the amount of time they need to process the mortgage is small.

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