The mortgage broking battle — are brokers worth using?

The mortgage broking industry is set for a drastic shake up but is it still worth using a broker to get a good deal? Or should you just do it yourself?

MORTGAGE broking has been the biggest battleground in the fallout from the financial services royal commission, prompting some borrowers to wonder if a broker is right for them.

Commissioner Kenneth Hayne’s final report this month recommended that upfront and trailing commissions paid by banks to brokers be phased out. Instead, a one-off upfront fee would be paid by the customer to the broker.

This move has sparked warnings it will kill the industry because homebuyers will go straight to lenders rather than pay thousands of dollars for upfront broker advice.

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Lenders are divided over whether it’s a good idea, but four key consumer groups have backed the changes and quit a mortgage broking industry forum, claiming that “the sector cannot be trusted to stand up for everyday homeowners when it comes to reform”.

Mortgage brokers are used by more than half of home loan customers, including Anna Gamble, 50, and her husband, David, 55. They refinanced their five-bedroom home last year when chasing a lower interest rate after their lender failed to budge and give them a cheaper offer.

David, 55, and Anna Gamble, 50, and their children Matthew, 16, and Caitlin, 6, used a mortgage broker when they refinanced their five-bedroom home to a lower rate.

“We knew from previous experience that finding the right lender is a demanding and time consuming process,” Mrs Gamble said.

“The broker was able to quickly identify a bank which was willing to consider our situation on its merits and this saved us, as well as the banks, a lot of time in unnecessary run around.”

Home Loan Experts managing director Otto Dargan said using a broker made it easier for customers than “talking to 30 different lenders yourself.”

“In particular property investors, high net worth borrowers and first home buyers are more likely to use a mortgage broker as they need more help than most borrowers,” he said.

“Most people who don’t use mortgage brokers are going to the bank that they have been with for decades and they aren’t as concerned about getting a good rate.”

Financial adviser Scott Haywood said there was value in mortgage brokers for those who were time poor “because people are not interested in phoning up six or seven providers and finding what the best deal is”.

However, consumers using brokers should be aware that brokers do not have access to every lender and in the market or all of the cheapest deals.

Four consumer groups — Financial Counselling Australia, CHOICE, Consumer Action Law Centre and Financial Rights Legal Centre — have called on Canberra to back the royal commission recommendations.

Financial Counselling Australia CEO Fiona Guthrie said removing conflicts over remuneration was the only way to make sure borrowers got genuine advice about their best options.

“Buying a home is one of the biggest decisions someone can make. It’s essential that any advice is given with a consumer’s best interest in mind,” she said.

The Mortgage and Finance Association of Australia’s chief executive officer, Mike Felton, said brokers still gave customers value.

“As credit has been tightened in response to the Royal Commission a number of customers are being turned away from their current lenders when looking to refinance,” he said.

“Brokers have become more important than ever in finding solutions for these customers.”

MORTGAGE BROKERS

FOR

— They can help find the best deals.

— Manage the loan process through to settlement.

— Can help with complicated loan scenarios.

AGAINST

— Do not always get the best deals.

— They do not have access to every lender.

— There are upfront and trailing commissions.

Originally published as The mortgage broking battle — are brokers worth using?