Keeping Competition Alive

December 18, 2018

Every time a Mortgage Broker secures a new loan for a customer we are comparing that customers proposed loan against thousands of other loans in the marketplace.

Mortgage Brokers foster & promote competition in the home lending market ensuring there is competition on interest rates, set up costs, and product features.

The goal is to obtain the best loan for your particular situation from the panel of 35 – 40 Lenders we deal with. Mortgage Brokers are constantly requesting pricing discounts from the Lenders to get the customer the best rate possible.

Since Mortgage Brokers entered the market 25 years ago Banks interest margins (gross margins) have fallen by over 2%.  The Mortgage Broker channel has given smaller Lenders a distribution channel and small Lenders have flourished.  The added competition has permitted rates to continually fall and products to evolve for all types of customers.

While the majors still hold a major share of the market (albeit a falling market share), they have done so by having to continuously remain competitive on price and product features.

Commission rates paid by Lenders to Mortgage Brokers are almost uniform and there is very little variance from Lender to Lender.

As a result, the chances of a Mortgage Broker “ pushing “ a certain Lenders loans because they get paid more, are minimal.

At the Banking Royal Commission in November, the CBA CEO ( Matt Comyn )  expressed support for a fee model where the customer pays a flat fee for any home loan whether it be sourced via the Bank direct or through the Broker channel. This would be a BIG win for the big 4 Banks only.

The Mortgage & Finance Association of Australia (MFAA) and other industry groups slammed the model proposed by the CBA as anti-competitive and one that would deminish competition in the market place (benefiting CBA shareholders – not customers) and it would lead to killing off the Mortgage Broking industry as it exists today.

Smaller Lenders would no longer have a distribution channel, more customers would go directly to the big 4 Banks and fewer customers would use Mortgage Brokers.  This means fewer customers would be comparing the rates of 35 to 40 Lenders.  Customers only get this choice if they use the services of a Mortgage Broker. All this equals less competition for the big 4 Banks.

It is interesting to note that CBA’s competitors, NAB and ANZ, favor the existing model where Banks pay Mortgage Brokers.  We are unsure where Westpac sits.  We think they support the existing model.

We believe a “customer pays” model will lead to less competitive interest rates and products.  A lending industry dominated by the Big 4 Banks.

Mortgage Brokers take the stress and legwork out of comparing interest rates and products in the market.  Leaving it to an experienced Mortgage Broker makes it all so easy.  You may see a really cheap rate in the marketplace or really good cash back offer.  But how do you know if you qualify for that product?  A Mortgage Broker can tell you in an instant, whereas a direct Bank employee may take your application even if they are unsure whether you qualify. Banks employees are under immense pressure to sell because they have sales targets to reach.

We save clients time and money both in interest rates, setup costs, rebates on promotions and product features every day

As you know our service does not stop once the loan settles.  Brokers offer after sale service and welcome your on-going enquiries as to the competitiveness of your

Brokers also welcome any queries customers may have in regards to the maintenance of their existing home loan.  We do this as we value you as a client and we do this because we get paid a trail commission from the Banks.  If we weren’t paid a trail commission we would have to charge our clients for the maintenance service work we do forthem..

What do we offer as an ongoing service to our clients?

After Settlement Advice and Service, We Provide.

We actively encourage you to ask us to perform a “health check” on your mortgage as and when you wish.

  1. Regular Price Requests – revising your interest rates
  2.  Refinance Options – is there a better loan out there for you.
  3. Product Switches
  4. Loan top ups
  5. New Purchases- both Owner occupied, Investment and Business and Commercial 
  6. Switching to a better loan with the same Lender, avoiding refinancing fees.
  7. Reviewing your rate when the “honeymoon” rate expires
  8. Ensuring rate discounts are passed onto you
  9. Partial and full discharges when you have sold a property or paid out your loan
  10. Reassessing when fixed interest rates expire
  11. Processing progress payment claims when you are building
  12. Substitution of security from one property to another.
  13. Personal Loans
  14. Business loans
  15. Commercial loans
  16. Equipment finance
  17. Restructuring of your lending post sale of one of your properties
  18. New Loan Scenarios and Options to add Value or Gain Savings
  19. Providing information in regards to Risk & general Insurance , & Superannuation .
  20. Pre-Approvals

If the Royal Commission recommends a “customer pays” model and the government of the day implements this recommendation this will do irreparable damage to the Mortgage Broking industry.

This could severely impact our ability to be an ongoing force within the Lending industry.

Working in customer’s interests, delivering better customer outcomes (better rates and products) and constantly improving your overall financial position .

The whole viability of the Mortgage Broking industry will be placed at dire risk.  This will lead to less competition, more profit for the big 4 Banks, less after sales service and a greater concentration of market share in the hands of the big 4 Banks.

This is a threat and real risk that could affect us all in the future if we do not advocate and promote the benefits and value that Mortgage Brokers bring to the table.  It will permanently damage our industry. In saying that, we may call upon your support to help our cause where possible as it is you whom we serve.

We like to wish each of you and your families the best over the festive season and may the New Year bring you all, joy happiness and good future to each and every one of you.

Better Choice Mortgage Services is not responsible for, and expressly disclaims all liability for, damages of any kind arising out of use, reference to, or reliance on any information contained within this website. While the information contained within this website is periodically updated, no guarantee is given that the information provided in this website is correct, complete, and up-to-date. Although the Better Choice Mortgage Services website may include links providing direct access to other internet resources, including websites, Better Choice Mortgage Services is not responsible for the accuracy or content of information contained in these websites. Links from Better Choice Mortgage Services to third-party sites do not constitute an endorsement by Better Choice Mortgage Services of the parties or their products and services. The appearance on the website of advertisements and product or service information does not constitute an endorsement by Better Choice Mortgage Services, and Better Choice Mortgage Services has not investigated the claims made by any advertiser. Product information is based solely on material received from suppliers. Advanced Finance (Pty) Ltd t/a Better Choice Mortgage Services are not financial planners or accountants and we would encourage our clients to seek professional advice before acting on any a financial or taxation information in this news post.

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