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

No, but it saves time and a burned credit score. The types of people that just walk into their local branch and apply for a loan rather than consult a broker are likely the ones that already do that anyway?

I'd wager not much would change, the folk that use brokers now would probably continue to do so and vice versa. Walking comparison website brokers would maybe fall by the wayside or be absorbed into the bank staff? Gun brokers may possibly carve our a further niche and command big upfronts for curly deals? These brokers have relationships and can negotiate with the people that have the yay/nay power, you're paying for essentially for access to those people via your broker rather than a cold online applications landing on a data clerks desk that ticks boxes and results in a yes/no. No facility to talk and negotiate through a grey zone.

 

If a broker, through shear lending volume or market clout, could provide me a loan rate better than market rates, which meant I saved that 1% over say a 2-3 year period, then yes, I would pay. Otherwise no, I would not.

From my experience, brokers tend to favour certain lenders/certain products so they tend to have biases which may or may not be in my best interest

 

Brokers can sometimes help clients get loans with the same banks that say they won't lend anymore because the bank staff may have misinterpreted something like income, not taken something into account or not argued a point.

Banks can and sometimes do the same - often via fraud - getting a loan through which a broker says wouldn't service.

 

I would only pay if the broker, through some competitive advantage, could effectively pay for the fee through reduced rates, or some other means. Otherwise, No.

From my experience, brokers tend to favour certain lenders/certain products so they tend to have biases which may or may not be in my best interest. Going through a broker, I still have to do the leg work of getting certified copies of ID, provide bank statements, proof of income etc. Once a broker is setup in their respective trade, how much time does it take to actually process a loan? 10 hours tops? 1% of $500k for 10hours work seems more than generous IMO given that the majority of the work a broker does can be automated. If a broker writes 1x $500k loan per week, that is $250k pa + trailing commissions.

 

If not the broker then you would be happy to pay the bank instead?

Sorry you've had a bad experience with a broker, majority work in your favor not against and aren't biased to one or two lenders, by the very nature of lending policies and serviceability they cannot put every deal with one or two lenders (unless a VERY narrow client base)
With regards to getting the supporting documentation - this is the same as if you went to a Bank direct, due to privacy laws you do have to do some of the work yourself as brokers cannot just access your internet banking, your emails for payslips, ID's etc.

Time spent on the application cannot be judged by the loan amount, some $500K loan applications would be more complex and time consuming than others.
I'm interested to know which part of the Broker's job can be automated ?

 

I wouldn't say I have had bad experiences, I have had a variety of experiences. I have had brokers who sent me through contracts with incorrect loan amounts, I have had brokers expect me to chase up with the bank when something doesn't quite go right during a refinance. That said, I have still used a broker. But I have been more inclined to use one because it is a free service. If it is no longer a free service, I would expect bang for buck.

I recently had a property plan done which cost less than the effective 1% on a $500k loan and I expect took much more than 10 hours of work. I know it involved at least 3 hours of face-to-face time + their time in the background doing research and then preparing a report.

 

Sounds like a variety of bad experiences
I'd still like to know which part of the Brokers job can be automated please?

 

Cert IV minimum - with anyone >2 years pretty much expected to start Diploma.

 

Since mortgage broking commenced...... food for thought

 

Once a broker has the clients details (personal, income, expenses, goals/objectives) the process of then selecting a loan, and then filing in the application screams automation to me.

Looking into the future, I envisage that the bank side of things will be more automated also. This should then lead to a more efficient interface between client & bank. If we continue to use brokers, this should lead to less time a broker is required to liaise with the bank.

 

There will always be demand for exceptional brokers who provide real value in complex cases irrespective of fees they charge.

Forget 1.1% of loan amount, I doubt many would even pay a fixed 1000$ as an upfront fees.

Current MB model survives because banks makes sure all home loan holders(direct/indirect clients) subsidise the fees paid to broker, banks makes sure there is no saving if a client decides to come directly to them as against via a broker. The moment they allow passing even half of that saving to clients directly see the migration in droves.

Banks margin are under pressure due to tighter credit env and MB business model is a low hanging fruit ripe for automation, just a matter of time.

I am questing why should there be a need for detailed loan application? just ask how much you can borrow and loan provider should be able to access applicants consolidated credit reporting(list of existing loans), repayment history along with all banks/CC transaction records, with consent of course, and come up with a borrowing capacity with a list of their current expenses and what is the max they can lend against the property applicants are after. This will suffice most of plain vanilla loan application, not very difficult to automate.

 

Chart looks similar to rates.

Australia Interest Rate | 2018 | Data | Chart | Calendar | Forecast | News

 

That may be your perception, in reality it is not automatic at all - you said you got a property report done where they had to go and do some research - same with a broker, depending on complexity of the app, they need to know the lenders policies towards incomes, existing debts, work on serviceability etc. it's not like they just plug data in and get a list of lender options, lender policies vary greatly and is the most common cause of a deal not proceeding.
The filling in of the application is not where the broker spends their time, that's probably the quickest part of the job.

 

We currently don't get 1% but regardless it is easy to look at the hourly rate on successful loan settlements and extrapolate as many do but
1) You're forgetting revenue is not profit. It's not just a computer and phone. Lost of costs such as ASIC fees, PI insurance, staff, rent etc etc
AND
2) You forget the unpaid work ie general post settlement service, loan reviews, inquiries that don't proceed, pre approvals that don't proceed, declined loans, loans that get repaid in first 12 months....all take lots of time.....

1 settled loan per week is actually quite hard to achieve when you factor in the unpaid work.

 

Agree looks correlated but if think about it it cant be. Margin (difference between cost of funds and lending rates) and actual underlying interest rates doesn't matter does it? Banks were making 5% spreads now they make 2%.

Late 80"s rates paid 18%, banks funding costs 13% = 5% Net margin
Now rates paid 4%, banks funding 2% = 2% Net margin

 

Even where the loan is simple you have to factor in processing times. the best lender may not end up being the best lender if they cannot settle in time. This happened to me recently, I applied for a loan on the day I signed the contract and 5 weeks later I had to settle with cash because of the slow bank.

 

I have to say Matt Comyn (CBA CEO) has done a fantastic job. Somehow he has managed to move the public narrative away from bank/branch misconduct, with thousands of example, to broker misconduct, which was really a non-issue apart from under declared living expenses (but that was really a systematic issue).

It appears to me that the RC is getting hung up on talking about 'potential conflicts of interest' in the broker channel without any evidence that consumers are actually being harmed. But they are ignoring the fact that bank culture has shown a focus on sales at all costs, even if there is no benefit to the consumer.

Matt Comyn need to give his PR team a raise!

 

I have no doubt there is a learning curve, just as there is a learning curve with any job. And nor am I trying to trivialize the work that is done. However, I work in the tech sector, and so we constantly have to innovate and find ways and means to improve efficiencies. Innovation will come to the Broking sector just as it has done to the financial planning sector and transitioning from managed funds with higher overheads to ETF's with lower overheads.

Those that innovate will thrive, those that don't..won't

 

Disagree, I would think it's easier to pick up extra margin with higher rates.
Can't see funding costs 2% with margin for 5%....for rate of 7%
But easy enough to see 13% costs with 5% margin to get rate of 18%

 

I was using 1 settled loan as an example of what I would imagine is "reasonable". Nevertheless, 1x settled loan of $500k = $5k = $250k pa + trail. Not bad for someone that needs a cert IV or diploma. In my industry, a wage of $250 requires bachelor + post-grad + 5+years experience and even then, you are unlikely to get that coin in oz.