It is now harder to get a loan approved by a bank, according to the executive chairman of Yellow Brick Road, who suggested that consumers should go through a mortgage broker for their finance needs.
Speaking on a Facebook Live event for consumers, hosted by the organisers of National Finance Brokers Day (16 August), Yellow Brick Road executive chairman Mark Bouris was asked whether it was harder to get a loan approved in the current environment.
In response, Mr Bouris said: “It’s not harder to get a loan approved, but it is harder to get a loan approved by a bank.”
Noting that the banking sector is being increasingly regulated to ensure that it is “good and stable”, Mr Bouris said that the repercussions of the crackdowns in certain forms of lending (for example, interest-only lending) meant that the banks were restricted to how they can lend to “certain segments of the asset class called mortgages”.
As such, he highlighted the proposition offered by brokers and the non-bank sector.
He said: “There are lots of brands out there [in the non-bank sector], and those organisations are usually willing to lend you money that the banks won’t lend to you. Generally speaking, though, you have to be prepared to pay a bit more interest for it, and that's just a supply and demand game (because the cost of funds is more to them).
“But it’s not harder to borrow money. There are lenders for every category [of person], but they are just harder to find . . . they’re not on street fronts, like [the big banks], you have to go find them. And again, that takes me right back to the fact that brokers are important, because brokers know who these organisations are.”
Mr Bouris went on to emphasise the strength of argument for using a broker over the direct channel.
He said: “I don’t think a lot of consumers realise that 55 per cent of all loans in this country are currently originated through a broker. So, banks only originate themselves (through branches or online) 45 per cent. And we’re heading towards the UK model where 70 per cent of loans are originated through brokers. There is a reason for it: there are so many lenders, and so many changes, and so many different requirements now, it’s like a minefield.
“If you try [to] get the best deal — whether it’s the best feature and price, or just the best price — there is a variability in the marketplace and even the banks don’t know internally what their best rates are. A lot of the bank branches don’t know, because it’s hard for them to keep up with and it’s not their business.
“A broker’s business is to know what every bank is offering in terms of price and features within all the sub-categories and within each bank's product line as well. So, my view on it, is that even if you have the ability to go direct to your bank, make sure you go and talk to a broker as well. You can compare the two. And because brokers aren’t going to charge you a fee, generally speaking, you have nothing to lose.”
The YBR executive added that as brokers only get paid once a loan is settled, it adds to the attraction for using a broker.
“There are 12–13,000 people in this country who, unless they write a deal for you, don’t get paid," said Mr Bouris. "These individuals, male and female, actually want to help you get a loan that suits your profile. And they have to get a loan that the bank will approve, so they have to become good at knowing what the banks will approve for your circumstances. If they get that loan approved and settled, they get paid.
“These people don’t get paid unless they do the deal, and they really want to do it because there is competition from within their own business, within their own ranks, within their own brokerage. They're competing with 13,000 guys for your business."
Mr Bouris concluded: “Consumers don’t realise that brokers really want your business. They really, desperately, want your business, and they want to do more than a couple of week[s] so they can live their lives, support their families. So, there is a need, as well as a want, to help you.”
[Related: Bouris eager to innovate amid APRA crackdown]