Aggregator provides PC with ‘evidence’ of broker outcomes

AFG’s submission follows assertions made by the PC that “preliminary analysis suggests that brokers do obtain slightly lower interest rates... it is not clear if this is attributable to brokers’ ability to negotiate with lenders or to other factors such as the characteristics of borrowers who use direct channels to source their loan”.

In one example provided in AFG’s submission, one broker cited a case in which a client’s loan was refinanced at a discounted rate of 3.72 per cent, down by 1.50 per cent from 4.52 per cent, and 80 basis points lower than the lender’s advertised rate. According to the broker, the client saved $7,000 per annum as a result.

Another such example provided by AFG was of a broker that helped a client “from not only a cost perspective but also getting his life back on track with his own home”.

“[The client] was at the time finalising a divorce and had the 5 per cent deposit plus stamp duty but didn’t have the [mortgage insurance] fee of $38,000. This client had a strong income and serviceability being very strong resulting in this proposed structure being approved by the credit department,” the case study reads.

“At the time, I also managed to obtain a 1 per cent discount off the standard rate. [The client] was new to [the bank] and was advised that funders do not offer loans without mortgage insurance from his normal bank by the banks’ lending staff.”

AFG told the Productivity Commission: “Thank you for the opportunity to provide further information about the positive consumer outcomes mortgage brokers deliver. The[se samples are] simply a small snapshot of some of the work that is being done by brokers to assist their clients.

“It is AFG’s contention that mortgage broking promotes competition by playing a valuable role in providing a distribution channel for lenders, particularly smaller lenders, and exerting downward pressure on home loan pricing. The benefits to consumers are evidenced by the [included] examples.”

Commenting after the release of AFG’s Mortgage Index last week, CEO David Bailey highlighted the role that mortgage brokers play in driving competition, claiming that “every single mortgage holder” would stand to lose if the industry was undermined and that “any semblance of competition will be decimated”. 

AFG’s initial submission to the PC dismissed calls for a “fees for service model” in the broking industry. 

The aggregator said that such a model would cause a “major disruption” in the finance industry, be a “clear disincentive” for borrowers to use brokers and “further entrench the oligopoly powers of the major banks”.

[Related: ‘No evidence’ that commissions result in poor customer outcomes]