Do I really need a broker?

If you go with choice when building with PD you can Pay $600 inital deposit to lock in the prices then $1500 at tender... Total = $2100

The remainder of the 5% deposit will be taken when the first draw down of your loan happens (@ Slab stage).

We used this option but are now considering going to the banks directly as we had problems with our valuation and dont feel that Choice have put enough pressure on the lender to revalue the property.

I think might be just what I am feeling (as im angry/disappointed as things are not going smooth) and not nessacarly Choice doing the wrong thing as everything is done by proxy and you dont hear direct from the bank(left out in the cold).

If I was doing this again I would probably go straight to the lender, but saying that if everything went through OK going through a broker dose make it alot easier/less time consuming.

I went through a broker and would do so again.
He selected a handful of mortages on offer at the time that would suit our needs and the amount we wanted to borrow.

We ended up with Adelaide Bank which had an awesome offer we otherwise wouldn't have known about if it wasn't for the broker.

Ten years ago when I was buying my first home, I did my research and found the best home loan I could. Then I went to a large broker and explained my situation and results of my research. He became very disinterested in my business because the loan provider I found didn't pay commissions and this loan was clearly better than any he could offer.
Pretty sure that this loan provider (now a bank) still doesn't pay commissions, and recently doing my research again for the new house, it's still the best I could find.
So, pays to do your own research because broker may not offer the "best" loan available if loan provider doesn't pay commissions.
Bit of work but in my case, it has saved some big bucks.
Chris

The same remains true today. For example, Nab doesn't pay comm to brokers, and consequently many brokers (I know from personal experience) refuse to recommend them. Brokers will eventually evolve to a profession where they charge a fee to the client rather than relying on commission. They will either do this voluntarily as it will be a key differentiator for them in the market, or it will be forced on them as banks further reduce the comm.

I am sorry to break it you again hoffies , but you are wrong.

NAB does pay commission to brokers, for offering NAB home loans & home loans by HOMESIDE Lending division.

Chris, you've hit an interesting topic discussing customers who completely ignore the service aspect and go to brokers to ask for the cheapest sticker rate. No broker in their right mind make a universal claim such as "find the best loan". If they did, they would be in court every week defending misleading advertising claims. But they will tell you upfront which lenders they are accredited with (ie their panel) and offer you home loans from that panel.

If you were buying a commodity such as petrol or sugar, I would agree with you; good on you, find the cheapest retail price and go with that.

But even then you wouldn't go to CsR and demand that they sell you ALDi sugar.

I am sure you have a job earning a wage somewhere. Would you come in to work on Sunday if your employer asked you and also told you it will be voluntary service without pay? If not, would your employer then have an issue with you being "disinterested in his business"?

What do you mean "again". When did Nab start paying upfront comm for Nab loans? They always have for Homeside. It must be a very recent thing if they now do.

ed. adelaide bank, ing direct, bankwest, citibank, the rock building society, police and nurses credit union, amp bank and suncorp are just a few of lenders that don't have a branch presence around Australia and offer their home loan products through brokers.

Like you said, customers are often first introduced to these lenders by brokers. These lenders may not have the physical presence but have unique features that the major banks dare not dream of. So much so employees of major banks frequently get their home loans from these lenders via brokers.

To name a few; unlimited repayments while fixed, 100% offset while fixed, free rate lock, free 100% offset on a basic low variable rate (no account fees)...

i said again because you didn't think banks made money on the lenders mortgage insurance premiums sold to borrowers (in another thread). sorry just teasing you.

I don't know when nab started but a lot of Accountants, Real Estate Agents and Lawyers make good commission from nab (and st ...... bank and w......) for referring home loan customers to branch lending managers. They just pass on a name and phone number from their own customer database to earn the commission.

Brokers can prepare and submit home loan applications to nab and earn commission for delivering customers and doing the work for the bank.

Yes they have long paid a spotters fee to the third parties you mention. However, if they are now paying an upfront comm to mortgage brokers (which is what I was talking about), then that situation must have changed within the last 3 months and would represent a complete turn around from their previous position of being a bank that doesn't pay upfronts, and pays lower ongoings to brokers. So are you telling me that they now pay upfront commission for Nab branded loans?

I can tell you from personal experience that the Nab branded products are not on panels or not recommended by major aggregators solely for this reason, and regardless of product quality. Which goes to the point of how brokers get paid, and accordingly the quality of their "advice". That is, the interest of the broker is not always aligned with that of the client. And yes, you will be able to point to many examples of that in other industries I know, but I'm talking about Mortgage Broking.

How do you think remuneration in the industry will evolve over time? It is the same struggle the Financial Planning industry is going through, but probably 10 or so years behind due to the relative infancy of the industry. To be a "profession", my belief is that advice must be untainted by commission. If a brokers service really is worth what a broker believes, they should charge a fee and forgo commission so they can be viewed as independent and unbiased.

what do you for a living hoffies? you are well versed in lending industry issues.

I work in the financial services sector and have worked in distribution and product management for a range of major financial and investment businesses. I'm relatively familiar with most distribution channels for most financial services and products.

And you've probably already guess this, my major bug bear is moving financial planners, mortgage brokers, (insert any other financial services intermediary) away from being a sales force to being a profession.

on the NAB issue, as far as i know, approximately for the last 5 years nab paid upfront commission to brokers. i can't tell you whether that was across the country.

my position is; no matter how much certain interests try to distort the market, demand wins in the end. CUSTOMERS vote with their feet. They go to lGA or wooli3s for groceries; go to a bank direct, or to a bank web site for a discounted rate and self service, or to a broker for service. If a bank chooses not to offer identical home loans through brokers, they lose out. CUSTOMERS are free to choose, but if forcing them to pay a fee is punishment for choosing brokers over direct channels, that would be an attempt to distort the market.

*A look at complaints lodged with Banking Ombudsman (for banks) and Credit Ombudsman (for brokers) confirms that there are less complaints against brokers than bank staff : Professionalism?

*An MFAA survey showed that customers of mortgage broker originated home loans were less likely to struggle with home loan repayments than bank staff originated home loans : Diligence?

For some strange reason, no media commentator is discussing how much commission car dealerships make (or car dealer finance brokers) or more relevantly how much salary, bonus and commission and fringe benefits bank lending staff earn (maybe these costs are not seen to increase bank costs therefore rates). i don't see any newspaper headlines about these.

You have to agree that; Bank Lending Managers offer you only their own bank's loans because their salary, bonuses, commissions and company cars are paid for by that bank. That's a profession.

thlo,
I'm not blaming the guy for being disinterested (however he was rather rude about it as well). It's just part of the story to make a point that doing some homework (rather than 100% relying on a broker) can have their advantages.

From broker's perspective, I think that people who do their homework, but still find that a broker can offer better, will more appreciate what a broker does for them.

I do agree that sticker rate is a very poor selection criteria. Further, comparison rate is only good if the assumptions are same/similar to the individual case. But with some high school maths, one can calculate repayments, etc and at the same time, conduct some scenario analysis. Of course, need to compare loan features as well.

I'm still of the understanding that ME Bank doesn't pay commissions.

Chris

Thlo, I'm enjoying this discussion. You are clearly a person who takes their job and their service to clients very seriously. Please don't take any of my comments personally. It will be a great day when your 13,000 MFAA colleagues are of equal quality. But hey, maybe that is already happening! That number shrank to 13,000 pretty quickly. Last time I was doing some research on the association it was 17,000!

With regard to the Nab issue, I made a mistake, they are paying upfronts but no trail. And as a consequence of this I know for a fact that those loans are not recommended widely by brokers.

You are right, customers are and should always be, free to choose. However I put it to you that in going to a broker they are not all aware that they won't be recommended certain products (even if it was the ideal one for them) because the broker won't get a commission. As I said before this is fair enough from the Brokers perspective, after all that is how the industry is set up and no one would expect them to work for nothing. The problem is that it presents a clear and undeniable conflict of interest when someone can potentially get a lesser product/service because the broker gets paid more for it.

I don't advocate the forcing of payment of fees at all, but I guarantee that is the way the industry will evolve, but it's going to take a long time. The better brokers will use it as a selling point to set themselves aside from product pushers, pushing product that is the best deal for them and not the client. As a potential client with full knowledge of how things work, I would happily pay a fee to have the piece of mind that I have the opportunity to get the ideal outcome for me, which is something I currently believe is not available to me.

With regard to your ombudman statistic, I suggest that is a meaningless statement from which no possible conclusion can be drawn. Because you and I both know that overall number of client interactions with banks and number of client interactions with brokers is vastly different (by a factor of thousands). Accordingly you would expect it to be higher. In fact, I would expect it to be massively higher. If on the other hand it is a statistic only relating to mortgage products, I would still expect there to be more complaints on the banks as they still undertake the majority of mortgage lending in this country.

With regard to the MFAA - (Mortgage and Finance Association of Australia, for those that don't know), for me that one falls into the category of "well they would say that wouldn't they". I've been involved in establishing "independent surveys" before, and since then, whenever I hear the term "independent survey" I immediately disregard it and any conclusions. Maybe I'm too cynical Independent surveys are established as sales tools.

I don't know why you would choose to draw any comparison with car salesman. If I were attempting to promote an industry I was involved in, there is no way I would effectively say, car salesman are doing it so why can't we. I would hope for a higher level of comparison. Anyway, it is irrelevant, someone goes to a Ford dealership expecting to be offered a ford and a person going to a Holden dealerships expects to be offered a Holden. However, someone going to a mortgage broker expects to be offered the most appropriate deal for them. Poles apart.

And finally, of course I agree a bank lender offers their own product. They are employed by the bank to do so, and as per the car example - a person goes to the CBA and expects to be offered a CBA loan. I'm not sure of your point there. And by the way, I don't claim the title of a "profession" for bank lending staff. Far from it.

Thanks again for the discussion Thlo.

cynical? isnt that an understatement?

MFAA's members are not just brokers but banks as well. So you are misrepresenting again.

thank you for your comments about me being different to brokers in general but I can't find comfort in that as that line is generally used to make condescending remarks about brokers which includes me.

It sounds like you would like to have an all encompassing debate here about how you would like brokers to operate. This is not the right place to have your debate. Have you made a submission to the Federal Government on its Financial Services and Credit Reform Green Paper? That would be the right forum.

No, not interested in an all encompassing debate, the issue is not that dear to my heart. I was however interested in your opinion as to how the industry may evolve over time, as i assumed it would be an issue close to your heart. It seems as though you are happy where it is. I feel the comments I have made are relevant to the question of the thread.

If you feel I have misrepresented anything here, please point it out and I'd be happy to rectify it. No where did I say the MFAA was mortgage brokers solely. However, as you and I both know the overwhelming majority are. From the MFAA themselves "The MFAA is an association comprising mortgage brokers, finance brokers, mortgage
managers, lenders (non-bank and bank) and support services to the mortgage and
finance industry. Of its 13,000 members, over 12,700 are individual mortgage or finance
brokers and mortgage and finance broking businesses. The remainder are non-bank
lenders, banks and support services. ". 98% of members are not banks. I don't think it is me trying to misrepresent here. My original comment about their "independent research" stands.

The only error I made was in relation to Nab brokerage arrangement. Which I have already corrected. Fortunately it had no bearing on the point I was making (probably just made is stronger as trail provides the most revenue and is the basis of business valuations).

For those interested in understanding a little more about the industry, here is an article by Scott Pape, The Barefoot Investor.

http://au.pfinance.yahoo.com/b/barefoot ... ge-lenders

And in the spirit of debate, here is the corresponding rebuttal from the MFAA on one of his points. I couldn't find anything that specifically addressed all of his points.

http://www.mfaa.com.au/default.asp?artID=2282

Once again, thanks for the discussion Thlo.

Thlo - I find it amusing that you compare the salary a Bank staff get's to your trailing commission. As a former lending manager with a major Bank - Westpac - I can tell you that the bonus / commission / fringe benefits that lending staff are able to earn are quite small.

Fringe Benefits - from memory two savings accounts fee free, staff loans are only discounted by the same amount as the highest Premier Advantage package that any public person is also able to get should their borrowings be over $500k - from memory. However we don't pay the yearly fee $300 as I am sure you are aware - which some customers are again also able to negotiate. Very few managers have company cars - in Sydney it may be more but in regional areas like Newcastle there was only two managers with cars and they were the branded VWs - which personally I wouldn't have driven. No petrol allowances, no renumeration towards registration or insurance on your own vehicle - other then what you are allowed to claim through the ATO - like anyone is able to.

No trailing commissions - once a loan is drawn it is drawn. And our targets were massive - which in my case was $750k drawndown per week. Not applied for or approvals in principal but actual loans drawndown. So when the median house price in our area is around $250k you have to draw down a lot more loans then that to allow for fluctuations on lending amounts. This is then added up over a 12wk period. Add in other targets such as insurance products and personal risk products makes the chance of a lending manager making target and therefore earning a bonus in an area like Newcastle fairly slim. In fact most managers don't make target and therefore earn a bonus quarter after quarter.

Not a sob story but just thought I would enlighten you as to the life of a Bank Lending Manager. I actually find it laughable that you would compare a Broker and his trailing commissions to a Lending Manager. It is a massively different market - the only comparison is that we both offer lending products BUT from my experience a Bank salesperson offers what products they think that is best for the customer - as it makes no difference to their targets what product the customer chooses - whereas a Broker can be influenced by which company is offering the Broker the best commissions.

What?? An internet forum about home finance, with a thread titled "Do I need a Mortgage Broker" is not the right forum to discuss Mortgage Brokers and their "industry"

What if everyone agreed with each other. It wouldn't make for very interesting or enlightening forums.