A Queensland mortgage broker with more than 20 years’ experience has warned that channel conflict has once again “reared its head” as bank branches attempt to lock in customers with fixed rates.
Rockhampton broker John MacMaster told The Adviser that even after two decades in the industry, channel conflict remains his biggest concern.
“I went through all of that when I first started as a broker. The client would walk into a branch and the branch manager would undercut the broker. That all went away for a while, but it has reared its head again,” Mr MacMaster said.
“I’ve had a number of instances from a number of clients who have gone into their bank branch. I’m quite fortunate because my clients tell me what happens.”
Channel conflict can occur on a number of different levels from intentionally undercutting broker rates to accidentally leaving the broker out of a conversation.
Mr MacMaster’s recent experiences with channel conflict have been different, however, and highlight why mortgage advice and education is so critical for borrowers.
“They [the borrowers] go into a branch to enquire about a credit card,” Mr MacMaster explained. “I have had a number of instances where the client has been talked into changing their mortgage to a fixed rate. Of course, it is obvious why the bank wants to do that. They want to lock them in.
“But it is my understanding that the bank is not explaining to the client the possible downside to a fixed loan [as well as] the possible penalties if you break it. I’ve had a number of cases with a non-major bank. They knew it was a broker loan and they changed it to fixed. I put a complaint in and they changed it back.”
Last week, specialist lender Private Mortgages Australia introduced a “subsequent referral fee” in a bid to alleviate broker concerns about channel conflict.
Responding to a survey conducted by The Adviser in June, which found that 88 per cent of brokers were more concerned about channel conflict than they were a year ago, and that 78 per cent of respondents had actually lost a client due to channel conflict, PMA said that it wanted to reward referrers for good leads.
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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.