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The association has called for brokers to be able to act on a client’s behalf during the home loan discharge and refinancing process.
The Mortgage & Finance Association of Australia (MFAA) has called for mortgage brokers to be able to act on a client’s behalf in the home loan discharge process should the client provide their broker with consent.
This is among the six recommendations the MFAA has included in its white paper titled Towards a faster, smoother home loan discharge: Benefits for borrowers, which aims to help streamline the discharge process and help borrowers make more informed decisions when refinancing.
The MFAA’s white paper emphasised the importance of choice and competition in a functional mortgage market that “places consumers at the core”, as well as the advantages of working with mortgage brokers due to their “broad spectrum” of knowledge of home loan products across a wide range of lenders.
Refinancing activity in Australia reached staggering heights during 2023 that drove strong competition among lenders through discounted interest rates and cashbacks on new and refinanced loans.
The Australian Bureau of Statistics (ABS) revealed refinances totalled $21.53 billion in July 2023, compared to $10.37 billion in July 2020.
Chief executive of the MFAA, Anja Pannek, said that since mortgage broker market share has reached a record high, “it just makes sense” that brokers should be able to act for a client during the discharge and refinancing process.
“This is what clients want their mortgage broker to do on their behalf. And, importantly, having this as standard process would reduce confusion and delays on refinancing,” Pannek said.
“In addition, we continue to encourage lenders to put their best foot forward when it comes to repricing. Retention activity once a discharge form has been lodged is not only frustrating for our members and their clients, it’s also inefficient for lenders.”
Pannek explained that the purpose of the white paper was to shed light on the ongoing challenges and opportunities in the home loan discharge process.
“Our research highlights that removing inefficiencies in the discharge process should be focused on removing the friction from the borrowers’ experience, this will result in improved competition and better outcomes for borrowers,” she added.
Along with brokers acting on a client’s behalf during the discharge process, the other five recommendations the MFAA’s white paper has made are as follows:
1. Improve efficiencies in the process to encourage more borrowers to switch lenders if it’s the right option for them.
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2. A simple-to-use, easy-to-find, standardised discharge form.
3. A reduction of the time it takes to process a discharge form and complete the switch to another lender.
4. Lenders should offer their best repricing offer upfront, abolishing the need for retention activity once a discharge form is lodged.
5. Automate and digitise the discharge process as much as possible.
According to the MFAA, these six recommendations were informed by various roundtables held across Australia late last year, where members shared their challenges faced by them and their customers during the discharge process.
“From missed settlements to clients having to pay more in fees and interest, the consequences of the current cumbersome home loan discharge process raised by our members at our roundtables made it clear that change is needed and will make a material difference to Australian borrowers,” Pannek said.
ACCC Home Loan Price Inquiry and recent recommendations
Furthermore, the MFAA has been vocal on the need to improve the home loan discharge process since the Australian Competition and Consumer Commission (ACCC) Home Loan Price Inquiry in 2020.
A range of recommendations were recently put forward as part of the House standing committee on economics’ final report – the Better Competition, Better Prices – from its inquiry into promoting economic dynamism, competition, and business formation.
The report set out options for introducing “behavioural prods” to guarantee more efficient and fair outcomes for consumers, some of which were initially brought forward by the ACCC’s original inquiry.
Pannek continued: “There has been minimal improvement to the home loan discharge process since the ACCC released its report in 2020 and we are pleased the government is now giving the ACCC’s report the attention it deserves.”
She stated that the MFAA recommended the introduction of a standard discharge form and a maximum turnaround time to process a loan discharge request at the time of the ACCC’s inquiry.
“… and we continue to advocate for these simple changes in this white paper,” Pannek said.
“But there is also more that can be done to assist borrowers to refinance. In the current challenging economic environment, it is imperative that borrowers are able to switch lenders easily.”
[RELATED: Government should pilot tracker mortgages, says competition report]
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