Complete Guide to Starting a Mortgage Broking Business

Complete Guide to Starting a Mortgage Broking Business

During the September 2023 quarter, mortgage brokers were able to write a significant majority of all new residential home loans with a market share of 71.5%, marking the second-highest recorded market share. Despite a slight decline in settlement values year-on-year, mortgage brokers settled a substantial amount of home loans, totaling $93.83 billion during the quarter.

Starting a mortgage broker business in Australia may be particularly appealing given the industry’s robust performance and the significant market share held by mortgage brokers. With these numbers, there is a clear demand for their services.

Whether you’re an experienced professional looking to venture into entrepreneurship or a newcomer to the field of mortgage broking, there is a wealth of opportunities in the industry. This guide is designed to provide you with a 5-step roadmap to navigate the process of starting and growing your own successful mortgage broking business in Australia.

Is it worth starting a mortgage broking business given the market trends?

Before anything else, you’re probably wondering if starting a mortgage broking business will be worth it in 2024 with increasing rates and a slow-growing economy. Despite these challenges, the broader trends in the Australian mortgage market suggest a compelling opportunity.

According to the latest data presented by the Australian Bureau of Statistics (ABS), owner-occupier and investor loan commitments experienced a short-term decline. However, the year-on-year growth rates paint a more optimistic picture with investor loans growing by 20.4% and owner-occupier loans by 7.4%. This indicates a sustained demand for mortgage services over time, reflecting the overall resilience of the Australian housing market.

Moreover, the changing composition of loan activity, particularly the increasing proportion of loans to investors, presents a notable trend that mortgage brokers can capitalise on. The rise in investor activity means that a diverse range of clients are seeking financing for property investments. Brokers are presented with the chance to cater to a broader client base and expand their service offerings.

Lastly, in the same report, there was a temporary dip in the number of first-home buyer loans in December 2023. Despite that, the year-on-year increase of 12.9% suggests ongoing support for first-time buyers in the market.

Although there were short-term fluctuations, the data from the ABS hints at the growth potential in the Australian mortgage market.

So, now, what steps do you take to get started?

Step 1: The Very First Step to Starting a Broker Business

Before diving into the intricacies of licensing, marketing, and operations, it’s essential to take the time to plan and strategise your business approach carefully. This involves defining your goals, identifying your target market, understanding your competition, and mapping out the steps required to succeed.

Because the mortgage broking industry is known for its potential profitability, it often attracts individuals who are eager to start their own mortgage broking businesses. Many of these aspiring entrepreneurs enter the industry with a mindset more suited to owning a business.

Most assume that their knowledge and experience alone will guarantee success. Unfortunately, this approach can lead to challenges and setbacks down the line. Without a clear business plan and strategic direction, those who want to start a mortgage broking business may struggle to:

  • Differentiate themselves in a crowded market,
  • Understand the needs of their target audience, and
  • Effectively manage their resources and operations.

As a result, their businesses may falter or fail to reach their full potential. Invest time and effort into careful planning and strategising so you can lay a solid foundation for your business and increase your chances of long-term success.

Step 2: Make a Business Plan

Step 2 is to make a business plan that will start with a concise overview of your business, including your mission statement, business goals, and a summary of your proposed services. Then, provide detailed information about your mortgage broking business, including its legal structure, location, and any unique selling propositions or competitive advantages.

Next, you must conduct thorough research on the Australian mortgage market, including industry trends, customer demographics, and competitive landscape. Identify your target market segments and assess their needs, preferences, and buying behaviours.

The next things that you need to think about for your business plan are:

Services Offered

Outline the range of services you plan to offer within your broking business, such as first home buyers, refinancers, or home upgraders. Describe how your services will address the needs of your target market and differentiate your business from competitors.

Marketing and Sales Strategy

Detail your marketing and sales approach, including how you will attract clients, generate leads, and convert prospects into customers. Consider strategies such as online marketing, networking, referrals, and partnerships with real estate agents or financial advisors.

Operations Plan

Define the day-to-day operations of your business, including staffing requirements, office setup, technology infrastructure, and regulatory compliance procedures. Outline processes for client acquisition, loan processing, and customer service delivery.

Risk Management

Identify potential risks and challenges that may impact your business, such as regulatory changes, economic downturns, or changes in customer behaviour. Develop strategies to mitigate these risks and ensure the long-term viability of your business.

Step 3. Legal and Regulatory Compliance

When starting a mortgage broker business, you must familiarise yourself with the legal and regulatory requirements for operating a mortgage broking business in Australia.

The regulatory framework is overseen by the Australian Securities and Investments Commission (ASIC), which sets standards to ensure consumer protection, professionalism, and integrity within the industry.

One key requirement is to be registered as a Credit Representative, which involves obtaining accreditation from an Australian Credit License (ACL), where lender accreditations are gained, enabling individuals to engage in credit activities, including providing mortgage broking services, on behalf of the licensee.

To meet ASIC’s minimum training requirements for providing mortgage broking services, individuals must hold at least a Certificate IV in Financial Services (Finance/Mortgage Broking). This qualification equips brokers with the necessary knowledge and skills to assess client needs, recommend suitable loan products, and comply with regulatory obligations.

In addition to initial qualifications, credit representatives are also required to undertake ongoing professional development, with a minimum of 25 hours of Continuing Professional Development (CPD) activities per year. CPD activities may include attending industry conferences, completing relevant training courses, or participating in seminars or workshops to stay up to date on industry developments and regulatory changes.

Step 4. Choose Your Aggregator

An aggregator acts as an intermediary between individual mortgage brokers and lenders (such as banks and financial institutions). Aggregators provide mortgage brokers with access to a panel of lenders, technology platforms, compliance support, and other resources to assist in their broking activities.

Partnering with a reliable aggregator provides mortgage brokers with the support, resources, and infrastructure they need to establish and grow their broking businesses successfully. It enables brokers to focus on serving their clients and growing their business, while the aggregator handles administrative tasks, compliance requirements, and other back-office functions.

How to Choose an Aggregator?

When setting up your mortgage broking business, choosing the right aggregator is key. Aggregators act as middlemen between banks and brokers. Picking the aggregator that fits your business model and goals saves you time and money in the long run.

Consider what kind of support you need from your aggregator. If you’re experienced, you might want less contact. But if you’re new to the industry, it’s crucial to know how much support you’ll get and how easy it is to reach them for help with clients.

At Vision Aggregation, service is our top priority. We know that success is more than finding the right loan for your clients. Success is also finding the right model and right support for your business. We offer complete transparency and flexibility, as well as an innovative framework that’s designed to amplify your business success and meet your overall business goals. We’re available to answer any of your questions so feel free to reach out.

Step 5. Establish Structure

Having processes in place when starting a broker business means establishing structured procedures for carrying out various tasks to achieve your business goals efficiently. Processes ensure consistency, accountability, and effectiveness in your business operations, allowing you to provide excellent service to clients while managing internal tasks smoothly.

Here are some of the processes that you should consider before starting your broker business:

  • Use a CRM (Customer Relationship Management) system to contact customers, manage leads, and keep track of their information.
  • Develop protocols for office procedures to ensure everyone knows how to work together effectively.
  • Keep records of financial transactions, invoices, and payments, and prepare financial statements.
  • Invest in ongoing learning and skill development for yourself and your team.
  • Choose software to plan, organise, and track projects for yourself or your team.

Start Your Mortgage Broking Business Today

Are you ready to start your own mortgage broking business and thrive in the industry? Vision Aggregation is your partner to success. We understand how you can gain maximum efficiency and compete effectively in today’s industry. We empower all brokers to excel in their success and lead the way. Contact us today.