A new report has provided fresh insight into consumer awareness around broker commissions and the willingness of borrowers to pay a fee-for-service.
The survey, which involved more than 1,000 borrowers who had taken out a home loan in the last two years, revealed that customers who used mortgage brokers tended to be more satisfied with their experience than direct-to-lender customers.
The report, titled Customer Experiences of Using Mortgage Brokers, found that 70 per cent of customers that used brokers were aware how the broker was remunerated.
However, 30 per cent were still unclear how that occurred.
The Deloitte report was undertaken on behalf of the MFAA, which said that many consumers may not be interested in the way brokers are remunerated.
Speaking at the release of the report in Sydney yesterday, the MFAA’s Stephen Hale said “there is no cost impact to the consumer whether they use a lender or a broker".
"The loan costs the same either way,” he added.
Lack of awareness around commissions 'a concern'
A breakdown of the customer responses shows that of the 70 per cent aware of broker commissions, 48 per cent definitively said a broker told them how they received commissions while 22 per cent said commissions were explained to them but “only at a very high level”.
Of the remaining 30 per cent of customers who were unclear about broker commissions, 15 per cent said they were not informed about commissions from their broker and 15 per cent were unsure.
The MFAA’s Stephen Hale said these figures were “a concern” for the industry.
“It is imperative that brokers explain the commission they receive to consumers. It is part of the rules around being a broker. It is a concern for us. It is something we need to educate our brokers on to make sure they know it is a requirement of their role,” he said.
Interestingly, when asked if they would pay the broker for their service, 63 per cent of broker customers said they would be prepared to consider it.
Of those, 23 per cent said they would pay a fee for service between $1,000-$2,000, 22 per cent would be willing to pay up to $500 and 18 per cent would pay between $500 and $1,000.
Deloitte financial services partner James Hickey who led the research, highlighted that a key finding was that - while overall satisfaction levels were high for both channels, with more than 90 per cent of borrowers satisfied with the service provided through either a mortgage broker or direct to a lender - mortgage broker customers were most satisfied.
“Some 32 per cent of mortgage broker customers rated their experience of using a broker at 9 or 10 out of 10, (where 10 ‘exceeded expectations’), compared with 20 per cent of lender customers giving a similar ranking,” Mr Hickey said.
“It was apparent from the focus groups, that the expectation going into the process had an impact on the satisfaction outcomes. Broker customers were largely after a relationship and support through the process. There was high satisfaction when this was provided.
“Direct-to-lender customers, on the other hand, had largely made up their minds as to what they wanted. They tended to be seeking best price and product features from their lender, so it was harder to exceed their expectations.”
Brokers were also rated as being more likely to be acting ‘in the best interest’ of customers, according to the report.
While 82 per cent of broker customers and 73 per cent of direct to lender customers agreed that the broker or lender generally acted ‘in their best interest’, broker customers were more confident in this statement.
However, 40 per cent of broker customers felt the broker acted in ‘their best interests’ at all times, compared with only 22 per cent for direct to lender customers.
James Mitchell has over eight years’ experience as a financial reporter and is the editor of Wealth and Wellness at Momentum Media.
He has a sound pedigree to cover the business of mortgages and the converging financial services sector having reported for leading finance titles InvestorDaily, InvestorWeekly, Accountants Daily, ifa, Mortgage Business, Residential Property Manager, Real Estate Business, SMSF Adviser, Smart Property Investment, and The Adviser.
He has also been published in The Daily Telegraph and contributed online to FST Media and Mergermarket, part of the Financial Times Group.
James holds a BA (Hons) in English Literature and an MA in Journalism.
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