Competition to drive brokers deeper into databases

Hyper-competition for new home loan customers among brokers and lenders will require brokers to more actively leverage their existing customer databases, according to mortgage broker marketing platform ActivePipe.

The competition for home loans has never been “harder and stronger” than it is now, ActivePipe general manager mortgage channel Paul Smith told Australian Broker. He cited the current cost on digital advertising platform Google AdWords for the term “home loans”, which is costing between $8 and $60 for one click.

This is resulting in an almost prohibitive cost and return on investment for brokers seeking to attract new clients through channels  such as Google Ads, as they are going up against lenders or larger broker businesses with larger budgets and teams in place to convert paid-for leads.

“If you were to reverse engineer how much that’s going to cost you for a settlement, it can be in the thousands and thousands of dollars – it’s almost an uneconomical curve for most brokers to bid on,” Smith (pictured above) said. “Even for lenders it’s still a crazy figure.”

“The big thing right now is everyone’s competing really, really hard for new customers,” he said. “That competition is obviously a lot of ads going out there, a lot of lenders or brokers telling stories or trying to persuade customers to use them.

“A lot of that stuff is effective, but it’s a tactic you see out there a lot. And while that tactic is strong, it’s not personal. Your competitors don’t have the level of data and they don’t have the relationship you have with your customers, especially if it’s really good.”

More than one transaction

Existing customers have already provided extensive amounts of data to brokers, Smith said.

“They’ve given you all kinds of information about their goals, their plans, their kids, what they’re trying to buy, what their strategy is; all sorts of stuff.”

This existing information on clients can often indicate what clients will seek to do a few years down the line, and potentially at what intervals, opening the door for brokers to be talking to them about supporting them with these additional finance needs.

For an investor client, Smith said this could be creating more future wealth opportunities with their accumulated equity, or for a first home buyer, it could be refinancing their loan to a facility where they no longer need to pay LMI when they reach a certain LVR threshold.

Data housed in a CRM could also help identify product cross-selling opportunities. “We know that six months after somebody purchases a property, that’s when they actually start to look at potentially getting a car loan or upgrading their car,” Smith said.

He said brokers could use the data they had collected to personalise and automate their communications to customers. Talking to them at the right intervals, and creating a better experience with these customers, could keep them loyal to the business over time, he said.

“If they’re out there in the market and they see the storytelling advertising, and they see these crazy rates, they’re going to sort of compare the feeling they have of seeing that ad to the feeling they have with the past broker they have used.

“Are they going to look at that ad and go, ‘Oh, cool, let’s fill out that form and have a chat with these people’? Or are they going to get that ad and think, ‘This is all right. Let’s go and talk to our broker and see if this fits into plans together,” he said.

New customer expectations

Brokers may need to leverage client databases more strategically than in the past, Smith said. While broking has traditionally been a relationship-based business, where relationships have often been maintained with more basic “staying in touch” strategies, this is now changing.

“Now consumers are expecting more, because they’re giving you more data, and they’re giving it to you in a lot more of a structured way, especially with how you see fact finds; I think customers are just going to start to expect enhanced journeys.”

A 2024 survey conducted by ActivePipe involving 500 people who had recently got a home loan through a broker found 32% of customers had gone to a broker they used before, which was up from 25% who said the same thing in a survey conducted in 2020.

While this reflected the growth in home loan volumes through the broker channel, ActivePipe’s research suggested that more factors are now involved in choosing a broker; for example, more people now use online reviews, and only 28% relied on referrals.

Staying in touch with existing customers more strategically will help combat this, Smith said.

“It’s not necessarily a situation where brokers are not doing it, and this is a big problem. It’s more they have never really had to, or had the opportunity to do it to this extent before,” he said.

“I think the brokers out there that understand the data they’re getting and who understand how to use their technology, are going to be able to evolve really nicely.”