Category: Blog

    Mortgage Broker Business Cycles

    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.

    Kimberly Bell, Whangarei mortgage broker

    Kimberly Bell, Whangarei mortgage broker

    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 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.

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    Mortgage Brokers for Builders

    Anybody wanting to build a new house will discover that the financing can be quite complicated. The sorts of problems that are likely to arise are around the timelines for the build, price variations during the contract, price variations during the planning and any disputes that occur along the way including non-completion.

    Patricia Carter has been a mortgage broker for six years

    The contract for the financing for a new build need to be very carefully drawn up to allow for potential problems and changes, and for this it’s pretty important to have a smart mortgage broker assisting. A good mortgage broker will understand all the tricks that the builder will likely employ, and the best way to mitigate any problems likely to arise during and after the contract period.

    At first glance arranging finance for a new house looks to be a simple as arranging finance for ordinary house purchase, in that there is an agreed date of handover and an agreed price. The mortgage broker will need to make certain that the contract is able to cope with any changes along the way included minor additions and changes and timing.

    The finance for any house built is generally drawn down at certain milestones during the project. The first milestone is obviously at the time of section purchase, but assuming that the client has a section then the first real milestone is at the signing of the contract when a deposit will need to be paid, generally around 20% of the purchase price. If you’re looking for Porirua mortgage brokers click here. The second milestone is generally once the concrete floor has been laid, and that may also be around 20%. The third milestone is generally when the frame has been erected, the roof put on and the external cladding and windows and doors installed so that the house can be locked up. This is also generally 20%.

    The 4th milestone can be when the house has been fully lined, and all the plumbing and Electrical work complete in the house plastered and painted and ready for handover. A good mortgage broker will know everything to watch out for at each of these milestones, and will be able to advise the client accordingly. When you need the best mortgage brokers Otago click this link. They will also recommend withholding final payment until sometime after the householder has moved it, in case there are any problems or issues to be addressed.

    While this is a more extensive process then simply getting finance for a new house, it is not that complex if a good mortgage broker is used, as the mortgage broker can provide valuable advice as well as managing the process effectively and protecting the client from any financial issues arising.

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    The Modern Mortgage Broking Market

    Mortgage broking can be a very lucrative business, simply because of the high level of commission fees that banks pay, in New Zealand around 0.65%. The mortgage broking sector in New Zealand is fairly tightly regulated, and is largely made up of competent qualified and registered mortgage brokers that are largely focused on doing a good job for their clients.

    Liz Singet, mortgage broker

    While the traditional approach to winning new business is to maintain good networks around the property industry including real estate agents, developers, builders, banks and independent financiers, the modern successful mortgage broking firm is intent on leveraging the Internet for new business to the highest extent possible.

    The Internet and in particular Google search is the go-to resource for any first time buyer or for any new client who is dissatisfied with their bank or does not know any brokers that they can trust. There are lots of searches for mortgage brokers Tauranga every month, and most of these searches will be valid potential clients serious on obtaining a mortgage. A particular quirk of Google search is that almost all of the search traffic ends up going to the websites on page 1, and only about 5% of the search traffic is available for everyone else. Even more peculiar, around 33% of the total search traffic will go to the website in the number one spot, and by any measure this is a massive advantage over the competition.

    Companies who succeed in getting their website ranked number 1 are simply going to be flooded with new business on a daily basis, independently of whether or not they provide a good service – provided of course that their service is not so bad that it becomes widespread public knowledge. The truth is for these companies that if they do provide poor service then they don’t need to worry because new business will keep on rolling in through the door.

    There are only a small number of large companies in this very valuable position, and they have had to make a major investment in web development and SEO development to get there, but the payoff for this investment is massive. Littered in their wake are large number of companies that have made a similar investment but have failed to get the #1, #2 or #3 slot.

    All remaining mortgage broking companies must resort to the traditional methods of generating new business, and can only look enviously at the large companies that have a lock on the Internet generated business. The good news is that this business model has the potential to be significantly disrupted by new entrants with the SEO capability to rank their own websites in the top 3, and therefore pluck business from under the nose of the big mortgage broking firms.

    The ideal business model is where an SEO specialist company links up with mortgage brokers Timaru and passes the leads directly to them in real time. These leads would be incredibly valuable to the broker, who would be only too happy to share a massive increase in income with the SEO company that was delivering the leads to them.

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    Mortgage Brokers and the Internet

    The Internet is a great enabler for those customers who are searching for a mortgage broker, but unfortunately those same customers are not fully aware that they are being very restricted in who they find when they search. The reason for this is one of the fascinating aspects of Internet search, as almost 96% of all searches on Google end up by visiting the web pages that appear on page one of their search, and all those web pages that appear on page 2 and beyond get to share less than 4% of the total Internet search traffic.

    This is a fairly standard rule right across the Internet, and comparatively speaking only a small percentage of companies on the Internet have mastered the art of getting themselves onto page 1 and even better into the number 1 or number 2 search slot.

    This is absolutely the case for mortgage brokers Taranaki, where a small group of generally large brokers own the first 2 or 3 positions on page 1 of any Google search for mortgage brokers. This very advantageous positioning has not come cheaply, as it requires a substantial investment upfront and ongoing in SEO, and a substantial investment in their website to make sure they optimise conversions to get customers to contact them..

    The rewards for these companies however are fairly impressive, as by simply ranking number 1 or number 2 on page one they can guarantee that they will be winning at least 100 times more business then the mortgage broking companies that are on page 2 or beyond. Indeed, these companies are winning so much business that they can afford to be very ruthless about which customers they choose to do business with, and they almost always use administration staff to pre-screen calls to make certain that only customers that are guaranteed to get a mortgage are passed through for service.

    The irony for the customers searching on the Internet is that if their mortgage problem is slightly unusual then they will almost always be quickly rejected as a client with the strong implication that they should look elsewhere. In the case of New Zealand elsewhere generally means those mortgage brokers Gisborne that do not appear on page 1 and are therefore a lot more motivated to gain new clients and will take a lot more effort to try and solve the clients problems. For these brokers they are generally surviving on referrals and repeat business, and so it is vital for them that they give good service. However it is equally ironic that these brokers who generally do give excellent service are also the hardest to find by customers searching on the Internet.

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    Alternative Building Techniques

    New Zealand needs to build an awful lot of houses over the next 10 years or so, to replace the old housing stock that is causing misery to tens of thousands of tenants, and to provide new housing for population growth and new immigrants.

    The problem in New Zealand is that the current standard building technique requires a team of builders on every site for a few weeks, and there simply are not enough builders in New Zealand to meet the demand. Overseas techniques are definitely applicable in New Zealand, and one exciting method is to fully build and assemble all the wall panels and roof and ceiling in a large factory offsite. Every wall panel will be completed to the point where all the wiring and plumbing is installed as is the internal lining and external cladding and insulation. This wall panel manufacturing process can be largely automated with sophisticated computerised manufacturing systems, and using these techniques a large number of houses can be built simultaneously and very quickly with a very small number of Highly skilled staff.

    The builders Tauranga meanwhile needs to prepare the site for the new house and build the concrete floor. Test cases have showing that once the concrete floor is ready then the entire house can be fully assembled on site in one working day, using heavy lifting machinery to carefully place the panels and skilled staff to join up the plumbing and electrical connections at the corners.

    This type of construction method can produce vastly more houses for the same number of workers, and is also very attractive for the home buyer because they can design their house online and have it manufactured in the factory. Every building can be unique and have a unique floor plan, and this makes for a very satisfactory purchasing process for customers. The manufacturing company will of course have a large set of standard plans that they know work well, and this process is not really suitable for the so-called architecturally designed monstrosity.

    The real advantage of this building technique is not only that a lot more houses can be built with a lot fewer building staff, but also that the building process is much cheaper. The manufacturing company will also be able to demand a very good price from their suppliers because of the sheer volume of houses that they are building, and the end result is that these types of new houses can cost between 15% and 20% less then the standard cost for current building methods.

    The manufacturing company will also be able to bulk import most of their components for the house panels, and at this point they should be able to take advantage of a very competitive world market and should therefore be able to get very large discounts as compared to existing New Zealand suppliers. This impact alone should have a very significant disruptive influence on the current Building supply sector.

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    The Death of the Fossil Fuel Industry

    The massive reduction of the cost of solar and wind power and utility scale battery storage has sent shockwaves through the fossil fuel industry, particularly the coal industry which supplies around 80% of the worlds electricity. In North America for example the coal industry has lost about 90% of the share market value because investors can clearly see the writing on the wall due to the explosive growth of natural gas power plants over the last decade or so.

    Investors have walked away from the coal industry because they see no future in it. The Natural Gas Industry there’s also threatened with the same result, due to the exponential reduction in cost of solar and wind power at the utility scale.

    Most of the oil industry who’s blind to the development of solar and wind, and the forecasts coming out of the industry show that they think that they have many decades of healthy oil sales ahead of him. What the oil industry does not take into account is the massive disruption of the transport sector that is about to occur due to the introduction of Transport as a service.

    Transport as a service will row explosively over the next 45 years, and it will be based around electric vehicles that are autonomously driven. An electric vehicle is around 5 times as efficient is it petrol driven alternative, and even if power generation continues using fossil fuels, there will be a massive reduction in the consumption of fossil fuels due to this increased efficiency.

    The problem for the fossil fuel industry is that once this reduction in market demand becomes apparent then all the investment money that is currently pouring into the fossil fuel industry will disappear and instead transferred to the renewable power industry, solar and wind. The feedback effect on the fossil fuel extraction and processing industry will be vicious, and suddenly the world will see that they do not need as much fossil fuel as in the past. The price for oil will drop catastrophically and never recover, and this world have a catastrophic impact on the economies of the world’s oil exporting countries. What has happened to the coal industry in United States will be replicated around the world to the oil industry.

    There is already signs that the Middle East exporters are aware of this looming crisis, and the countries with the most low cost oil are making certain that they are able to continue selling this or well as long as possible. However they are only delaying the inevitable, and the truth is that all the vast power that the oil exporting Nations have is already diminishing rapidly and will disappear over the next 10 years.

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