Mortgage brokers slammed by ASIC and told to do better
Mortgage brokers have been slammed by the corporate cop for not doing a good enough job in finding customers the best deals. And big changes are coming to save you money.
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Mortgage brokers have been slammed by the corporate cop for not doing a good enough job in finding customers the best deals.
A report by the Australian Securities and Investments Commission also found one in 10 consumers who had recently taken out a home loan were struggling to meet their repayments.
The report puts the heat on the industry which has come under intense scrutiny in recent years for the commissions and incentives brokers receive from lenders in exchange for pushing their loan products.
In damning new findings released by the Australian Securities and Investments Commission today, the report examined 300 consumers who when through the home loan process and surveyed another 2000 customers.
It found the following:
• Consumers expected the best deal when using a broker.
• Brokers were inconsistent in the ways they presented mortgage options to consumers, sometimes giving little or no detail of their options or reasons for their recommendations.
• First home buyers were more likely to use a broker.
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ASIC said they are working with regulators to deliver consumers a better way to compare mortgage interest rates and save themselves money.
And one in five consumers from the investigation believed they could score themselves a better interest rate on their home loan while some where unsure whether they could even got a good rate.
More than one in two Australians use a mortgage broker when taking out a loan.
The customer does not pay for the service, instead the lender pays the broker commissions.
ASIC commissioner Sean Hughes urged the industry to do a better job.
“Lenders, brokers and aggregators must step up to make it easier for consumers to meaningfully compare loan options and for brokers to communicate how a home loan option has been selected for them,” he said.
“ASIC strongly supports the recent Government announcement to enact a best interests duty for mortgage brokers.
“Importantly, the implementation of such a duty will align the role of brokers to the reasonable expectations of consumers.”
He said their investigation found some consumers dudded themselves of the best deals because there were cheaper alternatives available.
ASIC has begun working with regulators to develop a new home loan interest rate tool to improve price transparency for consumers so they could compare apples with apples.
The tool should be available in 2020 on ASIC’s MoneySmart website.
The latest report follows on ASIC’s investigation into brokers in 2017 which found customers who used a mortgage broker borrowed more, had higher loan-to-value ratios, spent more of their wage on their home loan, took out more interest-only loans and got the same rate that customers who went directly to a lender received.
One of the nation’s largest brokers, Aussie’s chief customer officer David Smith said getting a home loan remained confusing for many customers.
“At its heart, best interest duty is about transparency for customers and achieving good outcomes, and it will help give customers more confidence in the industry,” he said. “Customers are voting with their feet — they still overwhelmingly want to work with a broker, and ASIC’s survey recognises the important role brokers play in helping borrowers achieve a home loan, especially first home buyers.”
Originally published as Mortgage brokers slammed by ASIC and told to do better