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

And again comm bank said no, he said we can't give you a better fixed rate as advertised. I told them my brokers rate is better and asked why can't you match that rate, he told me to use my broker and maybe my broker was taking less commissions.

 

If they won't negotiate, give me or another broker a call. It's easily done in about 3 minutes. Most lenders won't negotiate on fixed rates, but the CBA often drops fixed by another 0.05% to 0.10%. It's always worth trying.

Like Brady indicated, the CBA (like many others), use a common portal for price negotiation which is used by bankers and brokers alike. What I don't get, is in the past month I've spoken with 3 different people who were told they can't do better on the pricing (2 variable, 1 fixed). I've then proceeded to get better pricing with the CBA whilst speaking with with the borrower on the phone. I really don't understand why the banker was unwilling to help them?

I should also mention, I didn't make anything out of this as the original loan isn't originated by myself. No upfront, no trail, nothing other than a little goodwill.

Edit: Just saw your last post. Last time I looked the CBA doesn't change commissions in exchange for better pricing.

 

I don't know your situation or who you have called. But I can assure you that the same rate can be offered through either channel be it broker or banker.
I don't know the brokers side of things for cutting commission for better pricing, but I can assure you has no impact when direct through banker.

Not complex but...

 

One thing that has not been mentioned is I do a new loan or refinance and in 12 months I refinance with same or different provider, and I already paid broker X dollar original loan and now I top up 200k what happens then? I pay a percentage based on the 200k?

 

I agree with you. Both channels use the same interface and thus should be getting the same pricing.

Despite this, I've had several cases recently where the direct channels have said they can't do any better. I can only assume they haven't even tried. This has occurred for both fixed and variable loans and I have been able to get better pricing quite easily.

There's no interface for brokers to waive commissions in this process and in several cases there weren't any commissions being paid as the loans were originated via a branch.

 

Yeah I've had the same with other bankers not being able to get the discount, guessing they just simply haven't done it. Or potentially was done on a different day and pricing has changed. It's like most things, simply who you're dealing with.

I've heard of a lot of staff before not wanting to price a loan because it was done by the broker, which can understand the trail is in place.
But like anything you provide that person the best level of service and chances are they might come back to you instead.

 

I believe CBA price differently depending on the competitor you chose. Also, if your RM knows a PDST manager you can generally get better rates if you ask. I can’t recall having issues with the branch offering lower rates and sometimes I can get better due to the banker/broker not being familiar with the pricing tool. Only time I have had issues with conflict is when the branch waives the annual fee for a period of time.

 

@Watson1 correct. Need to know the tool. It can change each day. 1st year package fee waiver no problem, after that branch is wearing it.

 

I think this is the most significant comment on this thread so far. There is a lot of discussion on here which follows pretty typical arguments regarding change, progress, and even automation that you can apply to any industry/profession.

A mate of mine who used to manage a team of programmers would often say to his team something along the lines of: If you think what you do is program applications in C <or whatever>, you are wrong. What you do is solve problems. Anyone can program, but not everyone can solve problems.
I think this applies to brokers as well. If you think the job of a broker (or a significant proportion of what a broker does) cant be automated, you are in for an unpleasant surprise. At the very least there are large portions that can be off shored (look at modern accountancy practices) or automated (my wife is an intellectual property lawyer, and in the last few years has spent a significant amount of time teaching AI how to do mark searching).

Whatever happens in the environment, be it regulatory, automation, increased competition, etc, if what you are doing is solving problems, there will be work for you.

Cheers
Inertia.

 

That is interesting, personally I haven't seen it myself, likely due to using the same competitor most times, I don't disagree that it does make a difference.
Where I have noticed a big difference is if new money involved or not eg. a $20K top up can mean a larger pricing discount on all existing cba loans compared to no new money pricing request for the same existing loans

 

Just an FYI for those brokers who may have concerns about CBA's intentions - NAB are offering particularly sharp pricing for CBA refinances. You wont find it promoted anywhere.... but if you complete the NAB pricing tool then escalate the response and note CBA as the competitor , you should see some pretty nice results

 

If the system changed from the bank paying the commission to the consumer paying the commission, would the consumer then have recourse against the broker if they were able to secure a better deal elsewhere?

 

Play around with the NAB pricing tool a little. It's very obvious there. Always use a major bank as a competitor. They're not trying to compete with the second tier.

My CBA BDM has acknowledged that they price new money better than existing money.

 

My comment was regarding CBA's tool so I'll definitely try it next time with NAB's as well, I generally always use a major competitor just as a default, interested to see the difference it makes.
Ta

 

It can change but historically....
- price against majors (some cases they open it to any banks/cu)
- >$250k borrowings starting sweet spot (recently down to $200k)
- If increasing loan $100k of new borrowings can be sweet spot for TLB (recently they were pricing existing the same as new)

 

I’m surprised the RC didn’t do some real work on this type of pricing behaviour from some of the major banks. IMO it would be the biggest positive benefit to a consumer if adjusted.

It’s also the biggest $ for $ impact on bottom lines too and is directly a ‘profit before people’ approach.

From a banks perspective, It’s application of basic microeconomics 101 for pricing structures to maximise profits:

- Differential pricing per customer, particularly loyal customers, extracting ‘consumer surplus’ away from customers to shareholders. Every customer has a ‘surplus’ whereby they obtain a benefit associated with their willingness to pay more. For example, I’m willing to pay $50 for netflix, but they only charge $10. If they could charge different customers different prices, Netflix could charge me $50 and extract my entire consumer surplus and I’d still purchase it. But they can’t apply differential pricing properly. Banks use this same concept to put $ in their pocket at the expense of consumers. Unfortunately it’s done over time too, as the product is essentially purchased over a long life period. They simply hit consumers who are a little longer into their loan period with higher rates. Why? The rate their willing to pay is higher (inertia, inability to refi,etc).

- Information assymettry to extract above surpluses, so much so intermediaries who source loans don’t know why it changes week to week. Existing borrowers don’t really have information on current discounting. Brokers that haven’t written a loan in the last week don’t have it (so how can existing customers reasonably know?)

I certainly don’t blame banks for doing this, they are businesses after all, but it’s at the general customers expense.

The standard policy approach of driving competition to the marketplace works to a degree, but there’s systemic issues that entrench poorer consumer pricing outcomes.

The pricing structure pretty much moves money from a customers pocket to a shareholder.

You want to take a real swing at them and help Australians out? Temper a banks ability to do this.

 

Not sure where you're seeing issues @Redom I definitely don't have the answers, I don't make the decisions, these are my thoughts not my employers - as are all my comments on PC.
- pricing against majors. Makes sense to price against your direct competitor, in many cases the minors can provide better rates. The majors provide similar level of service (branches, support staff, netbanking etc)
- $250k that's your usual minimum loan amount for most houses, even better if it's down to $200k. Wouldn't be commercial to provide best discounts to all borrowings (costs involved with setting them up, auditing, ongoing etc)
- again $100k is picking a figure where you might walk to an OFI, but again recently down.

 

@Brady - I didn’t mean CBA specifically, just a broad reflection on pricing practices in the mortgage market (all large lenders do this and many smaller ones). I’m talking more generally micro dynamics of pricing policies of mortgages in Aus.

All of the above parameters you mentioned are fine (competitor pricing, value based pricing, etc).

The tricks of the trade implemented by larger banks are applied with the continual increased discounting over time. This effectively is pricing the back book higher. Thorburns taken a bit of a stand against this practice recently. As an example, there are plenty of Aussies who got a loan from CBA in the last 3 years with roughly 1% discounts on IO INV Loans. Today that same discount is now approaching 1.70%. Therefore the same ‘value’ loan on the same product for the same postcode with the same risk has an 0.70% pricing difference (a bit extreme, but there’s been times where this exists).

Now the methodology a bank applies to achieve this outcome is designed to keep that old customer paying 0.70% more. So if your non the wiser, you could be paying tens of thousands for no reason at all. Many Aussies fall into this basket, everyone that is with a major bank and hasn’t done a loan review for two years will be paying more than they need to. This especially hurts older Aussies.

There’s alternative methods to achieve what a bank is looking to do...that doesn’t screw loyal customers over (e.g adjust the SVR up and down as required and discount purely on certain frameworks like value).

The microeconomics of the above are playing out basic pricing policies to extract maximum profit. They teach this in 101 Micro, banks just implement pricing strategies and use it to take as much profit from a loyal customer and to a shareholder.

Now there businesses, so optimal pricing policies is fine. But there’s scope inside a royal commission context to better the outcomes of thousands of Aussies by forcing better pricing behaviour from banks. I’m no fairness crusader, but it’s gone too far IMO.

Also, it adds so much confusion and noise. Making it all simpler can create a more efficient marketplace (albeit brokers would suffer in this competitive dynamic).

 

When I started broking 14 years ago, 0.7% off the Standard Variable Rate was considered a good discount. I imagine that there's still people with that same discount today.

Whilst it's easily fixed, it is fundamentally manipulative and all the big banks do it.

 

Agreed but what business doesn’t do this? (That being call customers because they could be on a better deal) Banks just end up costing A LOT more!
I believe consumers have to take some responsibility though. I write about this often that most people won’t spend 1-2 hours a year calling all their providers demanding a discount.

It actually blows my mind that people just leave things because their “too busy”. The irony is they are too busy working for $$$ at let’s say a rate of $50. I can 100% guarantee I can save that 10 times over year on year calling all my fixed expenses.