Would you be happy to Pay the Mortgage Broker

Discussion in 'Financial Planning' started by MTR, 6th Feb, 2019.

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  1. MTR

    MTR Material Girl Premium Member

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    Here is the link from Steve McKnight.
    Very interesting.....

    I know this will open a can of worms. Personally I would be happy to pay my MB, worth his weight in gold.... but that's me... what about you?

    Extract included



    I'll huff and I'll puff and I'll... - PropertyInvesting.com


    What Will Change?
    [​IMG]In the near-term, the answer is nothing. Most of the recommendations require changes to law, and with only a few sitting days of parliament left until it shuts up shop prior to the next election, it will be for the next government to roll out. With the housing market on the skids, and the economy likely to stall, there will be bigger fish to fry.

    The one big change that might happen, eventually, is Recommendation 1.3:

    The borrower, not the lender, should pay the mortgage broker a fee for acting in connection with home lending.

    In other words, consumers may have to pay some, or all, of the fees paid to mortgage brokers for their help in finding and obtaining a loan, if a user-pays system is implemented.

    If you don’t know, presently mortgage brokers are paid by the lender. This means that the client pays indirectly through either loan application fees, or via the interest rate charged on the loan.

    I suspect this will be the death knell to the mortgage broking industry as we know it, and, in a reversal of what happened in the 1990’s, large financial institutions will upscale in-house loan services to offer ‘free assessments’, and pay the higher overhead from the money they’ll keep rather than paying third-party brokers. It might be more transparent, but will it be better? I doubt it. Small to medium mortgage brokers simply won’t survive and they will need to find employment elsewhere. I note in particular Recommendation 1.5:

    After a sufficient period of transition, mortgage brokers should be subject to and regulated by the law that applies to entities providing financial product advice to retail clients.

    This will require that mortgage brokers will have to ‘know their clients’ and provide ‘statements of advice’ similar to what financial planners have to do now. Sounds good but will add a lot of time, cost and administration that small businesses won’t be able to absorb.

    Aside from that, most of the recommendations relate to businesses being forced to have better moral consciences and regulators to have better regulating. No more blind eyes on either side.
     
  2. Scott No Mates

    Scott No Mates Well-Known Member

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    Does this not play directly into the hands of the banks? Most punters will blissfully go off to their bank for a loan which will not charge brokerage against sticking their hands into their pockets to pay a broker who may or may not achieve a better outcome than the bank.

    Will it be to the advantage of the purchasers/mortgagors or purely play into the hands of the banks and screw up the broker system as we know it?
     
  3. The Y-man

    The Y-man Moderator Staff Member

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    @MTR

    IMHO the question should be:
    "If you knew as much as you did when you started off in the property journey, would you have been happy to pay a mortgage broker, or would you have just gone to a bank?"

    The Y-man
     
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  4. MTR

    MTR Material Girl Premium Member

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    it comes down to whether your MB adds value I guess.
     
  5. Paul@PFI

    [email protected] Tax Accounting + SMSF Business Plus Member

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    I would never have paid a broker the size of fee they have been previously paid by a lender. And I'm pretty sure brokers know that consumers wont pay anything like it.

    Banks have outsourced lending using the broker as the paid model and now want the consumer to meet the cost. Wont happen.

    Its like passing the hat around an airplane when you have boarded and asking all the passengers to chip in $500 each for fuel because the airline no longer wants to pay.
     
    Last edited: 6th Feb, 2019
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  6. willair

    willair Well-Known Member Premium Member

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    Depends on who you were to ask the question too..Any share-unit -holder will be quite different from any long time MB business holder ,and different again from a property investor and ppor buyer only time will tell..
     
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  7. MTR

    MTR Material Girl Premium Member

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    Good point?? dependent on property price I guess
     
  8. qak

    qak Well-Known Member

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    Will brokers charge flat fees? % of loan value? Hourly basis?

    I really don't see direct charging to borrowers happening. Someone has no idea what it's like to just not have a few extra $'000 on top of saving for a deposit and stamp duty.
     
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  9. oneone

    oneone Well-Known Member

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    how many ppl know exactly how much your broker is currently being paid based on your loans? we're told about %'s, the overall concept of trailing commissions etc - but its not quantified. This vagueness has benefited the broker industry over the years.
    Until there's actual figures to discuss about what is sustainable for brokers vs what ppl are willing to pay, its all just concepts
     
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  10. Joseph Skewes

    Joseph Skewes Well-Known Member

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    If the interest rate on the loan was decreased by the bank (below what direct customers are paying) to compensate paying the broker, then sure.
     
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  11. MTR

    MTR Material Girl Premium Member

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    So why is the commission reviewing this? What are the red flags here??
     
  12. MTR

    MTR Material Girl Premium Member

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    Hell will freeze over.. your kidding right
     
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  13. Joseph Skewes

    Joseph Skewes Well-Known Member

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    No. Brokers reduce staff overheads for the banks, why wouldn't you expect the bank to take at least some of the hit?

    If I was put in the position of no discount from the bank for using a broker, then I would still probably pay for a broker, but more likely only a single up front fee for advice (e.g. $500 for 2 hours consultation). It would result in a fair bit more work for the bank though (IMO), having to deal with my queries directly instead of being streamlined through a broker.
     
  14. qak

    qak Well-Known Member

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    Exactly - more work is required at the bank, the bank will need more staff, more premises, and that's why interest rates will go up, not down. The bank (shareholders) are not going to take a hit, the cost will be passed on.
     
  15. Marg4000

    Marg4000 Well-Known Member

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    You can do your own research if you want. Or pay for a mortgage broker.

    Same as choosing a property. You can do your own research, or pay for a buyer’s agent.

    Time or money - you choose which.
    Marg
     
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  16. MTR

    MTR Material Girl Premium Member

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    So what would you do?
     
  17. Otie

    Otie Well-Known Member

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    I think a flat fee should be paid by the borrower (but capitalised into the loan), however this should be an establishment type fee on ALL housing loans, and should be imposed by all banks to pay the brokers. Should be the same fee no matter which bank. The banks shouldn't be able to offer higher payments or trails etc to brokers. That way brokers are working for the clients (not incentives from the lender), broker gets paid and we all win. For non broker originated loans the fee should still be paid by the bank to the loan officer within the bank that establishes the loan
    I am happy to always pay a broker fee as long as it can be capitalised into the loans. I would always use a broker due to our complicated situation, however I would have even more reason to use one even without a complicated situation if I knew they were working for me and not a bank paid incentive to make them set me up with an unsuitable product.
     
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  18. Otie

    Otie Well-Known Member

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    I have the figures from my last refinance late last year. Figures were listed in the proposal from the broker. It is a large amount, however the loan prep took weeks to prepare and they put a lot of work into preparing the application. Loans were approved without hiccups.
     
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  19. TSK

    TSK Well-Known Member

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    Interesting....I guess the mb is silimis to someone who handles town planning aspect of Dev. They know who to talk to and what gets through or not - key job is to make sure finance goes through.
     
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  20. devank

    devank Well-Known Member

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    The amount I'll be willing to pay a Mortgage broker
    =
    $ Value of my time shopping with 4 lenders.

    Maybe new technology can do the comparator role and pass that lead to the lender.

    Maybe peer-to-peer lending might start popping up.

    Maybe the blockchain could ease the process of applying to multiple lenders.