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Research from Agile Market Intelligence and Bluestone Home Loans, based on more than 18,000 Australians, found that self-employed borrowers were more likely to approach their existing bank than a mortgage broker when seeking a home loan.
Removing undecided respondents, 64 per cent of self-employed borrowers said they would use a proprietary or direct channel, compared with 36 per cent who would use a broker.
The research also found that while 62 per cent of self-employed borrowers had used a professional service provider in the past year, compared with 56 per cent of employed Australians, just 10 per cent had used a mortgage broker, compared with 13 per cent of employed respondents.
This contrasts indirectly with overall broker market share, which has now hit 81.6 per cent.
Despite this, brokers remain a significant part of the advice journey, with 43 per cent of self-employed respondents saying they would recommend a mortgage broker to a friend who needed a home loan – the same proportion as the broader consumer group.
Tony McRae, chief commercial officer at Bluestone Home Loans, said that the findings point to a disconnect rather than a lack of demand.
“Mortgage brokers continue to play an incredibly important role in helping Australians access finance, but our research suggests many self-employed borrowers aren’t making it in front of the broker in the first place,” he said.
“Whether it’s because they assume they’ll be declined, think the process will be too difficult, or simply don’t realise there are lending options designed for people who work for themselves, there’s a clear real opportunity to demonstrate value and help more self-employed and alt doc customers secure finance.”
What keeps self-employed borrowers away?
Michael Johnson, director of Agile Market Intelligence, said he and his team looked into why self-employed borrowers were not engaging with the broker channel in the same volumes as typical borrowers.
“After collecting these initial findings, it was surprising to us to see that self-employed brokers leaned more towards the proprietary channel, specifically their primary bank, than we expected,” he said.
“We found that the two core themes. First, they believed their situation was too complex for a broker, or that the broker(s) they spoke to didn’t offer services to self-employed borrowers.
“The second theme we uncovered was that they already have a strong relationship with their business bank, and would go directly to them to get started.
“Importantly, we know that these are often the channels that people start with – but that doesn’t necessarily mean that’s where they will end up when they submit their loan application. Once they review their options, they might consider a mortgage broker after familiarising themselves with the offering.
“However, the opportunity for brokers is to cement themselves as a clear first choice when considering a mortgage as a self-employed borrower.”
The self-employed barrier to finance
The study found that 42 per cent of respondents agreed that being self-employed has held them back from building wealth through property.
However, the challenges around accessing finance extended beyond simply finding a lender, with concerns around income volatility, financial security, and property wealth all featuring in the research.
Irregular or unpredictable income was the biggest perceived financial impact, cited by 61 per cent of self-employed respondents. This was slightly lower than the 65 per cent of consumers who said they believed irregular income would be a risk if they became self-employed.
Less financial security or no paid leave was identified by 41 per cent of self-employed respondents, while 35 per cent said cash flow was harder to manage, and 31 per cent pointed to higher tax complexity or accounting costs.
Self-employed Australians were also concerned that accessing finance could become more difficult, with 68 per cent of a sub-sample saying they were concerned lending rules could tighten over the next 12 months.
Here, interest rates were the leading concern, followed by government policy or regulatory reform and tax or deduction rules, while concerns around how lenders verify self-employed income ranked further down the list.
The perceived barriers to finance may also be affecting people before they become self-employed. Although more than half of the broader consumer sample had considered becoming self-employed, one in four said concerns about getting a home loan would make them less likely to pursue self-employment.
Non-banks lag in awareness
Awareness of major banks was universal among self-employed respondents, with 100 per cent aware of at least one major bank. This compared with 45 per cent who were aware of at least one non-bank lender.
Awareness of non-major banks was higher, at 96 per cent, while 67 per cent were aware of at least one customer-owned bank. However, only 11 per cent of self-employed respondents were aware of two or more non-bank lenders.
Despite this, 63 per cent said they would consider a non-bank lender when presented with the option, while just 4 per cent said they would actively look for one themselves.
These findings were broadly similar across the board, with all consumers reporting 100 per cent awareness of major banks, 94 per cent awareness of non-major banks, 64 per cent awareness of customer-owned banks, and 45 per cent awareness of non-bank lenders. Just 13 per cent were aware of two or more non-bank lenders.
“Perhaps a by-product of many non-bank lenders originating exclusively via brokers, the awareness gap is a challenge and opportunity for both the non-bank category and for brokers,” Nicole Avery, chief marketing officer at Bluestone Home Loans, said.
“We all have a role to play in increasing awareness and helping borrowers understand there’s more than one path to finance.
“Self-employed Australians are actively seeking professional advice, but many don’t have visibility of the full lending landscape.
“That’s where brokers can make a real difference. By getting in front of these customers earlier and helping them understand the breadth of options available, brokers can provide confidence, choice and expertise when it’s needed most.”
[Related: Broking leaders unpack lessons from international markets]
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