Are you willing to pay a broker 1% +GST of the loan amount to secure you a loan/mortgage?

But are you comparing apples with apples?

 

I would happily pay a broker a fixed fee. $5000 for a $500k loan is too much imho I don't see the value. For the amount of time it takes me to earn $5000 I would research myself (for quite a number of hours) even if what I find is inferior to what a Broker would have suggested,

 

So it appears broker land is in big trouble if the commission bans commissions....

 

That's correct, loan size is not necessarily related to the complexity of an application. Some $50K top ups are harder than a $500K application, even under the current model a broker would be better off charging a flat fee for the top up.

 

Not that price. If I was to pay I would want the broker to have more experience or qualifications. I’m not sure it can be compared to lawyers, accountants etc as the barrier to entry is so low. This is coming from someone who has used a broker for all my loans but I’m not sure they have ever saved me the equivalent of 1%

 

The minimum qualification for a broker is a Cert IV and most groups require that to be upgraded to a Diploma within the first 12 months. Ask someone in a branch what their formal qualification is.

Incidentally some people are suggesting that they might pay, but 1% is too much. Brokers currently get paid about 0.5% and trail, which averages out to about 1% after 3-4 years. In that time brokers might do nothing, or do a lot of work to help clients on an ongoing basis. Worth keeping in mind that in Euro's scenario you wouldn't just be paying for the loan, you'd be paying for additional services on an as-needed basis. In my own business, providing these services takes up more time than actually writing new loans.

All that said, I agree with the general sentiment. I wouldn't pay either but I probably have a greater appreciation than most people of the value of mortgage brokers.

This survey is supporting the position that the CBAs suggestions are simply self serving and intended to drive profits to the big banks with no benefit to customers. Current remuneration models work well and do benefit customers. Furthermore the industry has gone to significant lengths to address potential conflicts of interest in ways that are measurable (note that nobody has ever actually demonstrated that these conflicts of interest actually exist).

 

Not in rate, probably but very likely in well structured, tax-effective loans - and what about the additional borrowing capacity that allowed the additional purchases that you would never have got if you just went to the lowest rate lenders? If you add up the additona lwealth created through the additonal fund you otherwise may not have been able to get....well it's hard to pinpoint then isn't it! (Not you specifically, of course - just a general point in that the value add is not just about rate, but planning, care, risk, tax knowledge - but not tax advice ).

 

I'm comparing like with like.

A fixed fee commensurate with the effort involved that gives a fair return on skill is best.

Two houses in the same suburb are superficially similar. They sell for $800,000 and $600,000. Both have the same REA, marketing, staging, number of OFIs, etc. The effort and costs to sell the two houses are similar, so the cost to the vendors for the REA should be the same. At present the higher priced place gives the selling REA more income.

I obtained conveyancing quotations for my recent sale. Fixed prices, with a wide variation and one very stupid conveyancer. (I engaged him and the documents he sent me were to sell my PPOR and not the IP. I had said I was selling the IP. I sacked him.) Why not have a fixed price for REAs and brokers, with some provision for extra effort if needs dictate? Conveyancers, REAs and brokers are doing an important job with property that is worth 5-20 years of income for the vendor and buyer.

Charging several thousand dollars for at the very most 10 hours of work is similar to what a lawyer would charge. A mortgage broker has far less training than a lawyer. I'd pay $800-1000, and that is all. More than that and I'd look at DIY.

 

An agent selling a multi-million dollar asset has to work much harder than when they're selling a $200k asset. Why? Everyone can afford a $200K house, so their market is 100's of qualified buyers. But only a handful in the market an afford a $10m property - they need to work harder to dig out the most people who can afford it (qualify the buyer) then get them over the line.

 

People will pay that fee and more.

Once they attempt to make application after application on their own to the bank and get knocked back.

Particularly if they have already bought at auction.

Or they might choose not to pay and find their borrowing power is only half of what it could have been if they had been advised through a good broker.

$8000 can be a easily be a million dollars in opportunity cost.

 

Thanks - I had not thought of that. As usual with this sort of exercise the extremes are easy. A house in a rural town of 50,000 people may sell for $400,000, quite a few interested parties. A mansion with a swimming pool and tennis court in a flash suburb has an EPR over $12 million. The first is a relatively easy sale, and the second is harder. Is it possible to quantify the EPR at which it starts to get harder significantly?

 

I agree and maybe it is just initial perception because the cost hasn’t been on the consumer. I did pay the equivalent of 2.5% for a B.A so it’s not that I’m adverse to the concept of fee for service. Just now being asked to pay an extra cost for something that was free can cause a bit of cognitive dissonance.

 

What I find interesting as well as that every broker in the past 2 years has taken a significant pay cut as well in both time and cost.

Cost - Banks now claw back unused upfront comms. This is a huge hit I imagine to many of you investment brokers who do the correct thing by releasing equity prior to an investment purchase. I can’t imagine how many of you are now going to be working for free on this kind of deal.

Time - Servicing Calcs now require a degree to work out, every deal probably needs to be ran through multiple calcs, every deal probably needs to be run trough a BDM given policy is changing daily, your now required to be 007 investigating every bank statement line by line and now the banks want pretty much every piece of documentation that you can muster.

I know a lot of this is best practice anyway but I would be interested to know from the brokers on here how many additional hours have been added to your deals in the past 1-2 years.

Your comms have not been increased for this extra work they have been decreased!!!
But still they want to rip you off even more.
Is actually deplorable.

 

In the short term, but it is really the consumer who is in big trouble.

Third party lending is destroyed because an up front fee for service does not work for the consumer, therefore brokers consolidate to a minimal presence and along with this, so do all lenders who are reliant on that channel for business and to drive competition across the market.

This plays into the hands of the CBA's, when then swiftly take the opportunity to increase their rates and fees to drive stronger profits for shareholders. Consumer pays more at the end of the day.

Hopefully the regulator takes a logical view of the situation and the absolute arrogance that has been displayed in recent times by CBA in regard to the role of brokers.

 

We're trying to get a deal done right now on a new PPOR. I have probably spent more than a coupe of hours on the phone with my broker over the last 3 weeks or so and lost count of how any e-mails. Every few days our goal posts have moved, which in turn has moved the brokers. I have my own business with a not-so straight froward structure, getting your head around that alone is a job in itself without then having to explain it to the lender. I'm pretty clued up, but I can definitely say I would struggle to find a loan that we could get over the line for our current circumstances if I was having to do it all myself now (on top of my own work). I'd likely blow my credit rating with failed attempts to secure funding and/or lose the place we're trying to buy.

I know our broker will not be making much at all on this deal especially based on the work put in, but I liken it to my own business. Some projects we make some decent money, others we know a the outset we'll at best break even and cover costs but we do them to keep regular clients happy so they keep coming back and giving us the ones we make some money on. Swings and roundabouts, as long as at the end of the year we're up then I'm happy.

I'd happily pay a fixed fee to our broker but I know and trust that he's working in my best interest and will give me the best chance of being able to achieve what we need (not just looking for the cheapest product) and that has come from years of dealing with him and several deals.

I may have a different opinion if I was coming in cold to a new broker. It's a mindset issue I guess, when you don't see the commission it's not a "cost" in your eyes, when its an upfront fee (even if the fee involved is the same) it becomes psychologically different. If we were going in cold to a new broker with an upfront fee it would be like any other professional, shop around for recommendations and reviews, no different to any specialist industry, every game has good and bad players.

The last time we refinanced in the UK about 12 years ago I did a ton of research, picked out what I thought best suited us then got a broker in anyway thinking they MUST be able to do better as that's their job and I'm just "me". They came round, ran some scenarios through their laptop, spat out the "best solution", which wasn't as good as what I had found. I showed her my research, she said oh yeah, do that one! (but would I mind if she still wrote it up to get the commission). Being that it didn't matter to me wither way, I said sure. So, she got a commission for my work essentially. What it highlighted though was as above, good and bad in all industries. Se was basically just a walking comparison website whereas our broker here knows what and how things need to work for us to get the deals we need period, that's where the value is when you're not in a simple cookie cutter situation.

I guess if the industry has a big shake up, the run of the mill rubber stamp brokers may end up in the wind replaced by in branch and online applications for Joe Public and the guns will find their niche and be able to charge accordingly.

 

The biggest impact would be PC memberships. Prob 80% of members are brokers so if these dropped off there would be a big drop in income for Sim.

 

Why would they be knocked down if they don't have a broker? Having a broker won't change their serviceability right?

 

I believe if brokers can get loans for investors/buyers that cant get loans directly with banks/FI than there are always demand there even if there are fees.

For most FHBuyers I cant see why they would ever need brokers

 

Would stop them wasting their time going to their own bank assuming they'd get a loan if their own bank serviceability calcs show they'd be knocked back. Broker would know straight away which banks to rule out right at the start (if serviceability is tight).

 

That's true but having a broker won't change the outcome of them being able to get a loan or not