I was fortunate enough when starting out as a mortgage broker back in October 2005 that my mentor was a mortgage originator and broker whose sole focus and training was for a non-bank lender, Challenger, now known as Advantedge.
But when you first start in the trade you want to help everyone, so 90 per cent of the time I wrote Challenger and the other 10 per cent I tried the rest, like Commonwealth Bank, Westpac, ANZ, NAB, St George, Bankwest, HSBC and Suncorp.
What I soon realised was that although the banks were meant to be my business partners, they were much harder to deal with compared to the non-banks like Challenger. Through my own experiences I soon realised that the banks are in business for one reason – put simply, they are in business to make profits for their shareholders, like any responsible company.
For this reason I give my hat off to the banks, in particular the big four, because without their strength during the GFC, Australia's economy may well have suffered like the rest of the world.
So why do I exclusively write loans with non-bank lenders?
Non-bank lenders do not have branches, do not have a mobile workforce, do not employ mortgage brokers and do not have the resources to advertise and promote their products to the general public. Instead, to remain competitive, they rely on mortgage brokers to promote and sell their products.
Non-banks are able to compete on rates and products because they don't have the overheads a bank has like staff, building maintenance, ATM networks and internet banking platforms. More importantly, from my experience, non-banks provide exceptional service – before, during and after settlement. This is the main reason why I use non-banks because they are my true business partners. I submit a deal and they work their hardest to get the deal over the line.
Non-banks are focused on one thing, and that is property loans. They don't offer clients unneeded credit cards. They don't try and sell mortgage protection insurance, superannuation funds or financial planning services. They are focused on what the client wants, and that is a property loan.
I could write an extra long essay on the amount of times a bank has structured a loan in their favour, not the client. When you understand the bank's motives you realise that they will always structure a deal to minimise their risk, again aligning their strategy to maximise profit. The perfect example is the family guarantee, which sounds like they are assisting first home buyers into the market – but be warned. If the children default, the parents are now at risk of losing their property. Banks will always try to cross-collateralise properties, which is potentially dangerous to their uneducated customers. This in my view is why consumers should never go direct to a bank.
Consumers should also be aware that banks are now 'data collection agencies', and in my opinion it is dangerous to have a savings account, a credit card and a home loan all with the same lender. The reason being is that the bank now knows how much you earn, when and where you go on holidays, when you change or lose your job and when you default on your credit card or home loan, which then puts a red flag against your name. I have seen clients be knocked back by the bank because they had a hiccup with their lender in the past and I have seen first-hand where a lender has taken money out of a client savings account and paid off the credit card without telling the client they were going to do this.
Every mortgage broker will have a story where a bank's lending officer has 'churned' a client by switching products at branch level or overriding bank policy to steal the client. Banks are meant to be my business partners, and yet their actions speak the real truth: they are in full competition with mortgage brokers. Why would you ever want your client to be exposed to commission-driven bank staff? I cannot understand why any mortgage brokers would want to use their services, fuelling their dominance and profit-driven tactics.
Nathan Daniell, managing director, Simplify Your Mortgage
Nathan Daniell is a residential investment and home loan specialist who founded Perth firm Simplify Your Mortgage in 2006. He exclusively uses non-bank lenders.