The mortgage broking business in New Zealand is very cyclical, both over the long term and over the medium term. Over the long term the mortgage brokers see their business wax and wane along with the property cycle, and while they can potentially see a massive change in income from one year to the next they also have time to adjust your approach to the market to mitigate any financial risks for themselves.
In any one year the mortgage broking business waxes and wanes, with the most obvious impact being during mid winter when is a drop in property sales and over the Christmas break when there is very definitely a drop in activity. Mortgage brokers need to plan for these and ensure that their cash flow takes this account. The Christmas downturn is very noticeable, and except for a handful of the very large mortgage broking companies who completely dominate the Internet search market for mortgage brokers, most mortgage brokers may as well go on holiday for December and January. There is virtually nothing they can do about this, because the amount of market activity drops off so significantly, caused by buyers going on holiday, as well as real estate agents and lawyers. However business still generally steams ahead for the very large mortgage broking companies who will continue to have a steady stream of new applicants coming through their door via Google search.
The long-term property cycle generally averages around 7 to 10 years, and is caused by cyclical effects in the local and the world economy. Often the cycle manifests itself as boom and bust, and certainly the boom years leading up to 2007 were followed by a massive period of bust from 2008 to around 2012. While the boom years were great for mortgage brokers the bust years were very tough, and a large number of brokers including virtually all the cowboys left the industry, helped along by onerous government regulations that forced all mortgage brokers to become qualified financial advisers. Only the very best mortgage brokers survived this period, but this is the same for virtually any industry that is cyclical in nature.
This has actually been very good for the consumer, simply because all of the less competent mortgage brokers have been eliminated from the equation. Check out www.MortgageBrokers.org.nz to find out more. The medium term property cycle over any one year can pretty much be anticipated and planned for well in advance, and competent brokers will be banking most of their earnings in preparation for the inevitable rainy day. In some respects the brokers have to behave like dairy farmers, who know full well that when things are going very well it’s not going to last, and hence they are always saving something for the downturn.