are mortgage brokers the best option ?

What increase investment into the branch network are you referring to?

As per your original comment, increase extra loans per week has nominal cost to product as the fixed costs are already there.

 

Narev has mentioned it a few times in briefings etc. Perhaps when he says invest he doesn't means actual $!!

 

I should clarify, I meant it's not an additional cost the consumer is bearing by going through the broker channel. All costs the bank pays come out of the consumers pocket.

Automation isn't a bad thing, it's going to leave more time for complex scenarios and advice. I think the industry is headed more towards an advice model rather than "here's the best rate" which is a terrible service proposition anyway, churning clients from one bank to another. Our time will be much more valuable if you need a bachelors degree in mortgage broking and time is spent structuring and placing complex or peculiar deals.

In 10 years you'll need more than a diploma to be a mortgage broker, look where financial planning is heading at the moment. That's the future of mortgage broking. Maybe not the fee structure (or maybe this too!) but certainly the qualifications and higher barriers to entry.

When this happens you'll see a decline in the number of brokers required because automation will take care of a large chunk of the easy deals. There'll also be the natural attrition of brokers retiring or changing careers before the new breed of degree qualified brokers come on board which is great news for anyone already in business. All of a sudden Joe and Jane can't get a loan through loans.com like 3 out of 5 of their friends who just purchased because Joe and Jane are self employed with only 9 months financials...who you gonna call?

 

Loan Busters?

 

the example you mentioned about a self-employed with nine months?

Within the legal limit with out fudging the data, What does mortgage broker do to make banks lend them?
Now Bank doesn't lend because of personal relations with the broker,
The bank lends because broker help map customers info as banks expects, to satisfy their credit rules. So it's a case of bank adapting their process to accommodate all scenarios, creating more elaborate use cases to satisfy all sorts of customers and make it usable to end customers.

Almost all of our income/expense/personal details are already there in digital form. it's a matter of consolidating it together to give the creditor a holistic view, with big data and AI, one doesn't even have to fill in their income and other details, just ask how much one can get for what price, and it coming sooner than we expect.

 

This assumption is predicated that there is homogenous policy across lenders. The brokers value isn't derived in the submission of the data to the lender - it's based on knowing which lender to use to begin with.

Whilst lenders retain unique policies to segment their preferred market, brokers will continue to deliver value to clients.

Had a call a week ago from a person who spent four weeks with their bank of 20 years trying to get 100k cashout to do renovations only to have the bank not allow the loan to proceed - after a few phone calls, application and 24 hours we had an alternative lender approve the 100k cashout + additional for their other longer term goals. The value provided there was not in filling out the applicants name and income details.

 

I would recommend using a good mortgage broker. Until last year I had always organised my own finance and although I had spoken to a couple of brokers (not on this forum) several years ago found those brokers were not proactive. However, last year when we were at the limits for our servicing on purchasing a new PPOR and had got knocked back by 3 of the Big 4, we saw a mortgage broker who was able to get finance because she understood what our needs were and was able to pick the right lender. Get someone you trust and who is good. The brokers on this forum give great advice.

 

Hi TheSackedWiggle.

I actually came across this page through Google Analytics, as that table was created by me. The link you posted is very outdated so please don't rely on it too heavily.

As for your question: You could put it that way? But using a 5 year term can't be compared to the borrowers interest rate per annum...

Using your method you would need to take into account that the borrower is paying 4% over 5 years in interest = approx. $200,000 (or 20% of the total loan amount!). So yes, approx. 1.598% of the loan amount is paid in commission over 5 years, but you would then need to compare that with the 20% paid by the borrower (not the 4% p.a. interest rate).

As for everyone asking where the broker's commission is coming from: I can't speak for all banks, but I know that CBA pays their broker commissions out of their marketing budget. It doesn't get included in the interest rate in any way.

Zak Avery,
Mortgage Broker.

 

IMO the industry is indeed likely to continue a relatively rapid pace of change over the coming decade - its already had a bunch of new players come in and do things with a focus on tech, atomisation & more customer involvement. That trend will continue over the next decade. More homogenous policy hurts broker proposition too - at least in theory.

Following a period of quite heavy credit growth, lenders are now operating in a more constrained credit environment & one where demand is far lower (credit growth back down to normal levels). This will likely mean they move to cost control to maintain & grow profit levels - and this puts the distribution costs (a chunk of operating expenses) into sharper focus.

Hmm i dont necessarily agree that brokers costs (or branch for that matter) aren't factored into loan pricing. Its a distribution channel that needs to be paid for & this comes from the consumer at the end of the day. A lower distribution cost should theoretically have some flow through to the end user (customer pricing). Similarly having stronger capital requirements should translate to higher funding costs & higher pricing for the consumer.

 

For the vast majority of investors, a good mortgage broker is the way to go. I wouldn't waste too much time on this. Get a good mortgage broker and start running. People who get caught up on every single little detail and nonsense like this, ....they will never get far.

Forget Michael Lee, Get a good MB and go.

 

People seem to forget that prior to mortgage brokers coming into the market about 20 years ago, there was little competition to the big banks and even less awareness of the competition. The banks mark-up on mortgage rates was as much as 4 times as much as what it is today.

There's any number of benefits to the various sales channels consumers can use, but focusing on how mortgage brokers are paid, is irrelevant and frankly a bit petty.

 

We see mortgage brokers get finance approved everyday where someone has been knocked back previously. As stated above (several different times and in several different ways) different lenders look differently on the same set of circumstances. A good broker knows the lender which best suits your circumstances. From where I sit, it's not a matter of one lender being looser than another, it is that different lenders add more or less weight to a particular financial metric.

 

I found it quite interesting on a lender PD day, to find out on their books specifically..... Construction loans on average had a higher rate of default and arrears than 95% and above lending....... As you mentioned, sometimes what appears 'looser' criteria from the outside is actually lower risk for that particular lender.

In the end, banks do want to maximize profits off their books and doing so are always monitoring where the greatest risk currently is.

 

A good MB is about expertise, knowledge and support. The APRA changes and bank policies are more complex now than ever.