Backed research says “yes”

Consumers can save thousands of dollars by working with independent mortgage brokers instead of retail lenders, according to a new study.

It found that consumers who work with independent mortgage brokers save an average of $10,662 over the life of their loan compared to those who use nonbank retail lenders.

The research, conducted, analyzed over five billion detailed loan records from the most recent 2023 Home Mortgage Disclosure Act (HMDA) data.

“As we’ve been saying for over a decade, the wholesale channel continues to showcase time and time again that it is the best place for a consumer to get a loan,” said Mat Ishbia. “This data further proves that when consumers work with an independent mortgage broker, they typically save thousands of dollars, and almost always have a faster, more seamless and personalized experience.”

The study also highlighted the cost advantages for borrowers at the outset of their loans. In 2023, a year marked by high interest rates, homebuyers in the wholesale channel paid an average of 115 basis points upfront for a 6.58% interest rate. Meanwhile, those in the nonbank retail channel paid 148 basis points upfront for a slightly higher 6.60% interest rate.

“For years, our own analysis has shown that mortgage brokerages supported by wholesale lenders provide consistently better value to consumers,” said Willie Newman, principal of Willow Canyon Advisors. “It’s exciting and validating to see that this is supported by an expert third-party research company, and that the 2023 results continue supporting the mantra ’brokers are better’.”

The study also found that veterans and minorities benefited significantly from using wholesale brokers. VA loan borrowers saved an average of $13,432 per loan and received lower interest rates when working with an independent mortgage broker.

These borrowers also received slightly better interest rates – 6.26% on average through the wholesale channel versus 6.40% through retail lenders – and paid lower upfront costs.

The research also pointed out that the wholesale channel is more effective at serving minority communities. In 2023, more home purchase loans were originated to minority borrowers through the broker channel than through retail channels.

In Minority Majority Census Tracts (MMCT), the approval rate for loans was 70% in the wholesale channel, compared to 58% in retail. This trend was consistent in non-MMCT areas as well, with approval rates of 75% in wholesale versus 64% in retail.

“The research shows brokers not only offer better deals on average, but also excel in reaching minority communities, especially in times when affordability is a key concern,” said Jonathon Haddad, CEO of the Association of Independent Mortgage Experts (AIME). “The numbers in this study speak for themselves, and further underscore the importance of educating consumers across the country on the benefits of getting a mortgage with an independent mortgage broker.”

“The broker channel has seen tremendous growth over the last few years because of these direct consumer benefits,” Ishbia added. “We don’t believe it is unrealistic for the channel to reach 50% market share and will do all we can to support our partners and educate borrowers.”

By Candyd Mendoza29 Aug 2024