Speak up in support of mortgage broking so we can continue to support you.
The major aim and intent of the Banking Royal Commission, and the current recommendations (as at 5thFebruary 2019), is to protect consumers from unfair banking practices. At Loanscope, we fully support levelling the playing field between you and the banks – it’s a big part of what we do.
However, when it comes to home loans, has Kenneth Hayne inadvertently given power back to the Big 4 banks? The political point-scoring has already begun!
Let’s look at the findings:
Will you actually be worse off if Mr. Hayne’s recommendations are implemented?
60% of home loans are now organised by Mortgage Brokers. This is a reflection of the superior service that good brokers, such as Loanscope, provide. We save you time and money, help you find a market-leading product, help you understand home loans and continue to provide on-going reviews of the services and rates you are receiving on those loans into the future. This statistic shows a big vote of confidence for brokers, and consumer satisfaction for their service to the industry.
(To see our client rating of 4.9/5 stars, click on this link https://socialsurvey.me/pages/loan-scope)
Mortgage Brokers in the Home Loans Market Benefit You Through Increased Competition and Lower Interest Rates.
For example, as your Mortgage Broker:
ü We help smaller lenders, who often offer lower rates, to better compete with the Big 4 Banks. We can introduce smaller lenders to our clients. This also helps to keep interest rates lower to offset the Big 4’s perceived monopoly.
ü We review home loans every few years to make sure they remain suitable and competitive, by negotiating lower interest rates on your behalf. If this can’t be done, we’ll negotiate to move your home loan to a lender with a better offer. It’s generally fairly straightforward to refinance currently, so lenders have to work hard to keep your business year-in year-out.
ü We can easily find out if your current bank is looking after you. If not, we’ll help you find a better one, to protect you from profiteering and poor service.
Therefore, a strong Mortgage Broking industry is crucial to better outcomes for banking consumers.
Banks Currently Pay Mortgage Brokers – As our clients, YOU Enjoy Our Services For Free
It’s no secret that we are paid a commission by the lender to personally introduce your business to them, so we don’t have to charge you (our clients). As Brokers, we work hard for lenders, saving them time and money in sourcing customers. The lenders, in turn, enjoy fewer overheads for marketing, local branch establishment, staffing and in-house bonuses. This winning formula benefits all.
Consequently, a small and monthly fee-for-service commission from the lenders to the Brokers is fair. It works! This trailing commission structure is only valid whilst the loan is in place, or until the loan is paid off. This system helps to support us, as your Broker, to continue to support you after your loan has settled.
The alternative proposal, following the Royal Commission, could be that Customers pay Mortgage Brokers from the outset, and for every subsequent interaction.
We are incredulous about this, but Mr. Haynes has recommended a switch from “banks pay” to “customers pay”. So instead of banks paying us for the service we provide them, he thinks it’s better that you pay us – and they pocket the savings!
The Commissioner speaks of a fee that will be added to the loan amount, to supposedly make it more palatable! I know how my clients feel about mortgage insurance, so I am not convinced!
We strongly disagree with a “customers pay” proposal!
Why? Because most first home buyers already struggle to build the deposit they need.
Making the loan amount higher, by adding the broker fee, has all sorts of negative implications. There could be more mortgage insurance to be paid, it might push the interest rate higher, and could also mean that clients can no longer afford the home they have fallen in love with. In a difficult home buying market already, surely this is not desirable.
We see it see this way: the current ‘banks pay’ system is great. It means you have the flexibility to shop around with us, if you end up being unhappy with your lender’s service and/or rates a few years down the track . We can help move you onto a more competitive offer to save you money. There are no large costs involved in doing this.
Under the proposed new system, however, the potential for making such a change in your lender, through your Mortgage Broker, means you will have to pay that fee again – either out of your savings or as an add-on to your loan amount. This makes no sense!
It creates a clear disincentive to shop-around for a better deal. Hence, the original lender will retain the business, they’ll have less incentive to look after you, and the winner is – The Lenders again!!!! Aren’t they the ones under scrutiny by the Royal Commission in the first place?
The question is, do you wish to lose your right to work with a Mortgage Broker, who will help you find and keep a competitive home loan? Or would you like to give more power to the banks to advance their profiteering?
And if you’re now thinking you would just go directly to the lender to avoid the broker’s fee, think again. The Commissioner has recommended that the banks also charge exactly the same fee, to “avoid unfair competition”, so there would be no way around paying a significant fee for refinancing your home loan. This clearly takes power away from you (the consumer) – and gives all power back to the banks.
A large proportion of mortgage broking businesses would not be viable under a “customers pay” system. In fact, it may wipe out the customer-focused industry altogether. The banks would be delighted with this prospect of course. Without the value in being given best-option choices by Mortgage Brokers, like ourselves, our customers would be forced to go back to being unsupported. The banks would become all the more powerful!
Interest Rates Keep Jumping – Can you keep abreast of it by flying solo?
Comparatively, can you afford to use the same GPS Road Maps without doing an upgrade every few years? Probably not!
Let’s look at some reality factors and how the removal of trail commissions to Mortgage Brokers will likely affect you.
You may not be surprised to learn that banks have been regularly increasing their interest rates “out of cycle” since the Global Financial Crisis. They then come back a short time later with a special offer to attract new clients. We’ve seen investment home loans with rates at 5%, in a market with rates as low as 3.99%! The longer you keep your home loan with a particular bank, the more likely it is that your interest rate is significantly higher than the best offers in the market.
This is where we come in, as Mortgage Brokers who care about customer benefits. We will try to re-negotiate with your bank if you want to stay with them. If we can’t, you have the choice of refinancing to another bank to save you money with a better interest rate. This is a good system. The average big bank discount during the GFC was about 0.70% off the Standard Variable Rate. This has now grown to 1.5%! Increased competition, fuelled by the Mortgage Broking industry, is a key factor in this equation.
The Royal Commission has recommended that trail commissions are no longer paid to Mortgage Brokers, and the Federal Government has already agreed to remove them next year. The implications are:
Mortgage Brokers will be threatened with the potential of being unable to sustain their business services to benefit consumers
Banks may lower their costs, but will increase their profits
Brokers will not be able to assist current clients with regular lending reviews to save them money, and
Consumers will lose protection that Mortgage Brokers are currently able to provide.
THE FINAL COUNTDOWN
Our deepest concerns are for the continuance of our Mortgage Broking industry. Businesses, such as ours, may become unsustainable. Loanscope has built a strong reputation for honesty, integrity and customer service excellence over the past 4 years. Yet we now fear for our survival. We fear for the consumer’s right to choose a lender who is offering fairness and quality service in a hovering lending market that continually fluctuates.
Keeping our customers’ best interests at heart is so utterly important to us. We take the pain and confusion out of finding a best-fit home loan, and factor in all of the variables that apply to each client. We act for you. Do you want the right to choose removed?
Without your trusty Mortgage Broker, you will be at the mercy of the banks, pay them more, and no longer have the right to look for a better deal. So, what can you do to protect yourself from Big Bank Monopoly?
With the Federal Election pending, and Bill Shorten already motioning to support all of the Royal Commission’s recommendations (if elected as Prime Minister), we’re hoping you will rise in your own wish to support your personal freedom of choice in choosing and shifting lenders with the help of quality Mortgage Brokers like us. We implore you to rise against the potential for the Big 4 (in particular) to re-emerge as powerhouses of control, profiteering and higher bank fees.
Can you afford to be complacent and say nothing about the Royal Commission’s Proposals? We think not!
Voicing your concerns before recommendations become actual legislation, via social media or other means, will help to keep the Federal Government and the banks accountable, and place our Mortgage Broking industry in a key position to continue to give you expert advice, save you money and ensure your home loans are of the highest suitability to your personal situation for many years to come.
Keep your right to choose and speak out now – or forever hold your peace!
Senior Broker / Director