Mortgage Broker: What's the outlook for home loans, your industry, your job, your pay, your future? Are you looking for another job, especially when compounded by the downturn in the property market?
Borrower: If you are looking for a loan and were considering using a broker, are you prepared to pay $2k or so upfront fee?
I used a broker for my first house purchase, he was useless as anything. Then when I wanted to extend the loan for some renos, I had to go through him again as the bank wouldn't deal with me directly. Would never use one again and didn't for my current purchase.
IMO (and apparently that of the RC) brokers were only viable because they got a lot of money from trailing commissions which are essentially another form of fees for no service. Yes the fees were coming directly from the bank, but obviously it is the customer who ends up paying through higher interest rates, fees, etc.
No doubt it will suck for a lot of people in that business, but like just about every other business, times change, and if you are providing a legitimate service for a reasonable fee, customers will come.
but obviously it is the customer who ends up paying through higher interest rates, fees, etc.
That's not obvious at all - all borrowers pay the same rates effectively, whether or not they use a broker. If we use this logic, customers are also paying for every company's marketing expenses, retail lease expenses, employee benefit programs, etc.
I would not be prepared to use a broker if I had to pay for the service, for essentially something that I can do myself.
This.
I used a broker and they provided heaps of useful information, including recommending a better deal than I had found myself, and they gave me access to RP Data reports about the property I purchased which caused me to offer a lower amount (which was accepted)
That being said, if I had to pay them up front, I'd be less inclined to do it.
Interesting that the Coalition seems to be baulking at implementing the full recommendations of the Royal Commission. Specifically that Mortgage brokers should be paid by the borrower.
As a borrower - I think the recommendation in full was that brokers were to charge a fee commensurate with bank application fee, which would be capitalised onto the loan, so not needed to be paid upfront, and if a loan is originated by a broker then the bank can't charge their application fee. I've yet to read the report in full but that was what I gleaned from other sources. If I've read it correctly then it's a zero-sum game for upfront expenses, but the fee to be charged - whether charged by the bank or charged by the broker - will be a lot steeper than the app fees now in play. And amortised over the life of the loan, thereby increasing the interest paid.
As someone in the industry (not a broker but working in a large NBFI which has a sizeable third party channel) I am concerned that our volumes will drop, if people move away from brokers. I've spoken to a few brokers over the last couple of days who are also worried, although at the moment their biggest source of angst is over the removal of trailing commissions (I actually think they got this bit right!).
I think brokers do play a useful role, especially if your situation isn't straightforward. How many banks do you need to visit before finding the one that will accept your particular circumstances? How many potential hits to your credit score could you end up with? These are the questions that people should be asking themselves. I know there are some cowboys in the industry still, but most of the time they're your best chance of getting your loan with a minimum of fuss.
My broker (who is excellent and now just use but will still do my own research) has been ranting on FB about it lol.
As a borrower though, I think the recommendation is unworkable. Brokers are paid $2K for their work from the lenders. It's not like you get a discount for going direct to them, in fact, when I first went for my original loan, I tried to negotiate directly with my bank to get the rates lowered to what he was offering (through them) and they wouldn't budge.
However, while I like getting savings, the broker's services wouldn't pay for themselves if I had to pay them myself. So I simply wouldn't use them.
The downside to the current set up is that brokers will obviously push the products which pay them more. I think the current recommendation will kill the industry as we know it with brokers only working for the rich. What would be better would be for regulation to limit how much can be paid in fees and trailing commission, not to reduce their pay but more to ensure that there's a ceiling for how much can be paid to ensure a level playing field and that recommendations best suit the customer not the broker's commission.
The downside to the current set up is that brokers will obviously push the products which pay them more.
That's the concept of conflicted remuneration in a nutshell. It encourages unethical behaviour.
while I like getting savings, the broker's services wouldn't pay for themselves if I had to pay them myself. So I simply wouldn't use them.
Quality independent financial advice costs money. If you paid the brokers fee upfront you could expect the rate to be even lower as banks would not be able to shoulder the costs of the broker.
These changes are a good thing for consumers and banks, but I do sympathise with brokers that set up their business under the previous system.
Regardless of your opinion or experience with using a mortgage broker, PLEASE WATCH THIS VIDEO which explains how this will effect you, the borrower. https://bit.ly/2WW0pq2
Disclosure - I am a mortgage broker.
If you read the report, it recommends following the Netherlands model to maintain broker's competitiveness. That means the banks are required to charge an extra fee on loans if the consumer approaches the bank directly.
Let's see… allow banks to charge more fees… good idea? Anyone?
I'm guessing by the lack of replies that they are busy with these deals…
https://www.ozbargain.com.au/node/375808
https://www.ozbargain.com.au/node/385386
https://www.ozbargain.com.au/node/412037