You may have observed a recent push in the media by a range of mostly under-informed consumer groups to ‘reform’ Mortgage Broking. Headlines such as ‘scrap commissions’ to better serve home loan customers are damaging and undeniably dangerous to the competitive nature of our finance market.
The market share of loans written by Mortgage Brokers is well over 50%. It has been steadily growing year on year, providing real competition in the system and putting pressure on banks to be more competitive. This market share alone proves that consumers have overwhelmingly endorsed us and value our comprehensive offering.
Brokers are well educated and professional in our approach, aiming to retain customers for life. Yes, like all industries, there have been a few bad Brokers, but much like any industry they do not last. A Brokers’ key source of new business is their existing customer’s family and friends. If this was not the right system, would this loyalty be present?
Lenders pay us a commission upfront and ongoing for the service we provide on their behalf. The consumer does not miss out and the lender benefits by only paying us for loans which proceed to settlement. Full transparency of commissions exists at every stage of the process and our customers understand that we also need to make a living.
To provide some context, I must paint a picture of a world without Brokers. The consumer would be left with 2 main channels to source their loan; the traditional bank branch or an online based provider.
If a client walks into a bank, they are presented with the few options which that lender offers and will be restricted by the one bank’s policy requirements. Will they receive a good outcome? Possibly. Would the outcome be better if they were presented with a range of options from over 30 lenders? Most likely.
Online lenders are, in most cases, owned by a bank or get paid a commission by the bank to sell their loans (sounds a little like a Broker without the personal service). Some online platforms are promising loan approval faster than it would take to complete your weekly grocery shop. Taking out a home loan is a huge decision and will most likely be the most expensive purchase of your life. Why would you not seek the professional advice of a Broker? Online lenders say they are the future, what will ultimately hold them back is the lack of real advice and assistance they can provide to a consumer who certainly needs support at this stage in their life. We offer a 24/7 service, regularly meeting and taking calls after hours and on weekends. An algorithmic based lender will not help you on a human level.
I spend somewhere between 5 & 50+ hours working on each individual loan application. This depends on the complexity and type of funding. At least 2 hours is spent face to face with our clients completing a full needs analysis and ensuring that they are educated to the point where they can make a completely informed decision about their chosen product. Cheapest is not always (very rarely) the best outcome for consumers and we consider a lot more than their current scenario in pairing them with a lender for a 30-year term.
The ongoing support that we provide is important. Yes, we do get paid an ongoing trail commission. This enables us to employ staff, review loans annually for suitability and handle any switches, top-ups, repayment changes and requests our clients have. Would your bank request greater pricing discounts or improved terms without you asking them to?
We are privileged to be able to offer the same products and services at no greater cost to the consumer. . My question to the consumer groups in question is very simple:
"If banks stop paying us for our service and we are forced to charge consumers a fee, will this improve competition and consumer outcomes?"
I think the answer is very clear, the Broker service offering mirrors what I believe to be a good consumer outcome.