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A leading business development manager and founder of National Finance Brokers Day has criticised an online news article which claims to reveal “four things mortgage brokers will never tell you”.
The article, running on money saving website Mozo, states that while mortgage brokers “can be a great resource if you have a more complicated home loan or need a little mortgage advice”, anyone seeking to use one should “know exactly what [they’re] signing up for”.
The article claims to “reveal the common things a broker will never let you in on”.
This four points are:
- “brokers don’t compare the entire market” (because their aggregators “only compare a select number of providers and home loan packages”);
- brokers receive “a higher commission for recommending certain home loans” and therefore “the lenders that pay a higher commission percentage often receive the most leads from the broker”;
- brokers are “not property experts”; and
- “they will generally not reveal what the best interest rate in the market is” as “brokers only have a number of home loans that they offer to their clients”.
Speaking to The Adviser about the article, Suncorp BDM and National Finance Brokers Day (NFBD) founder Dino Pacella said he felt “compelled to respond to this article” because he has a “a deep passion in promoting and educating the consumer market about finance brokers”.
Mr Pacella commented: “There are a few points in the article which… may be technically correct, [but] they are certainly not influencing factors which affect the end result for the client”.
He said: “The first point states that brokers don't have access to the entire market. Ninety-nine per cent of brokers have access to anywhere from 25 to 30 lenders. This wide range of lenders allows brokers to match their client with the appropriate institution and majority of the time this is not driven by rate. A broker will ensure that the client meets a (or a few if this is possible) lender's particular policy and then will calculate serviceability with that lender or lenders. Once these factors are determined then product is considered which is followed by the interest rate discussion.”
Touching on the suggestion that commissions play a role in which lenders a broker uses, the Suncorp BDM said that the difference on a $400,000 loan is “as little as approximately $300 between the lowest and highest paying lender”.
The NFBD founder said that in his experience, he had “never come across a broker where this is an influencing factor on what products are presented to the client”.
Instead, Mr Pacella said: “Brokers get paid on settlements so they certainly don't look at putting a client with a lender if it's not going to suit the client's individual circumstances by helping them achieving their dream.”
Agreeing that brokers are not property experts, the BDM said that he did not believe brokers claim to be such, and suggested that the advantage of talking to a broker is that “they have specialist connections where they can put clients in touch with experts, outside of their field, to assist with other matters such as settlements, accountancy work, real estate agents etc.”
Mr Pacella concluded: “Purchasing a home is a serious transaction and one that should not be entered into without doing your homework. With the online coverage about interest rate the highest it's ever been it is easy to find out what the lowest rate is but this might not always suit [a borrower’s] individual situation especially if [they] have an out-of-the-box scenario.
“Doing research is always a good idea but having a finance expert working to secure the most suitable loan possible now and for future plans is certainly one I personally wouldn't pass up.”
[Related: Michelle Bridges on why her broker was a ‘godsend’]
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