Times have changed in lending and the jury is still out if it’s for the better. Like any change, it takes some getting used to but everyone is slowly getting their heads around the new landscape. We have to believe with where the Australian economy is and the cash rate being at all-time low of 1.5%, these changes have come in for a reason and have the consumers best interests at heart.
Why it’s not just about rate anymore.
Gone are the days where you can just choose the lender with the cheapest rate and go with them. There is so much more to what a mortgage broker does now around providing advice and structuring your lending. If it was just about interest rate, there would be no need for mortgage brokers and people would just use comparison sites. However, as the lending market has become more complex, mortgage brokers have increased their market share to over 50% and some predict it will be as much as 60% within 12 months. This actually gives the banks an impetus to close down branches – the only time I need to go into a branch now is when my grandma gives me a $30 cheque for my birthday.
Sure, if someone comes to us and they are what the industry calls a ‘vanilla deal’ (an employee with payslips, borrowing 80% or less Loan Value Ratio [LVR] and services strongly) then yes, they will normally have the pick of a bevy of lenders. If though, servicing is tight, they are borrowing over 80% LVR with Lenders Mortgage Insurance (LMI), they are using a guarantor, they are Australian-expats, they are self-employed, they have existing debt, they want to purchase an investment property, want to build or renovate a property or want to pay interest only for their home loan, then there is more to it than just the interest rate.
Comparison sites have their place.
There have been some new tech start-ups who are killing it in the mortgage broking space using social media, re-marketing and automated marketing techniques. But even though they are getting thousands of leads, their conversion is still very low and they still need people to talk to clients. Computers aren’t smart enough yet or no-one has built the software to handle complex or sophisticated applicants, but people also want to be able to speak with a human being to explain their circumstances and what they want to achieve.
Mortgage broking as far as I can see right now can’t be automated. With new policies coming in every week and product and rate specials that only brokers can get, more now than ever you need to align yourself with a quality advisor who you trust and can have a strong relationship with. As technology crushes other industries, people are still going to own property and need money to buy it and for now, there is a need for mortgage brokers to provide advice and support along the way.
What to look for in a great mortgage broker:
- Has an Australian Credit Licence (ACL) or is a Credit Representative: It’s a legal requirement for all credit providers to have or be appointed under an ACL.
- Accreditation with an industry body (MFAA/FBAA): This means they adhere to a code of conduct, must meet certain education requirements and complete ongoing training and education.
- Diploma or Certificate IV in Mortgage Broking: Required to be a member of an industry body and hold accreditation with most lenders in Australia.
- Has a large panel of lenders at their disposal, not just 4 or 5: Some brokers will only use a couple of lenders because they have good relationships or get certain benefits by doing so (like trips away). Make sure you find a broker that has a range of lenders available to you and can explain why they chose a particular lender.
- Understands the market: Can give advice on what is happening not just in the home loan market but the property market too.
- Wants to be your partner: A great mortgage broker will partner with you to help you achieve financial success. They have a ‘client for life’ attitude and want to ensure you achieve your goals.
- They won’t recommend a product based on interest rate alone: As mentioned above, there is so much more to lending in Australia right now. If you are dealing with a broker who is just offering you the lowest rate then you are missing out on a range of other features and services available to you. These services/features can potentially reduce what you repay over time, despite not having the lowest rate.
Whilst from the brokers perspective, navigating this new lending landscape is challenging, it also ensures that only those brokers that maintain their educational standards, follow a thorough and compliant process and most important, keep their clients’ interests at the forefront of what they do can flourish. This means greater protection for you – our valued customers.
Tell us, what do you look for in a great mortgage broker?
By Damien Roylance.