The bad behaviour uncovered by the banking royal commission has appalled all of us. Unfortunately it hasn’t been all that surprising. It has confirmed, with the tragic stories of Australians from all walks of life, what we have always known - the banks aren’t on our side.
One of the more contentious recommendations of the eye-opening and overdue royal commission calls for changes to how mortgage brokers are paid, which would essentially wipe them out of existence. But isn’t this throwing the baby out with the bathwater?
It's not for nothing that almost 60% of home loans are arranged through brokers. Many brokers provide a valuable service, and act ethically to genuinely help their clients get a better deal.
LINK: This interesting article from Choice talks about the benefits of a 'best interest test' - meaning that, by law, a broker would have to act in your best interest (not their own), to find you the best possible loan option.
What we know, more now than ever, is that the banks are NOT on our side. It's in their DNA to overcharge and get you to pay more. So surely we should be doing everything possible to turn the tables in your favour, to help you find a better deal, save you money, and get the system working for you.
Getting rid of brokers could have some unacceptable results. For one, it would reduce competition, because without expert help, everyday borrowers are unlikely to review and compare the number of different loans that a broker would. This would inevitably drive more people to the major banks, away from smaller lenders - who often offer great deals. When there is less competition, home loans will likely be more expensive for everyone. It could be just what the banks want.
After helping people to begin and grow their property portfolio for over 10 years now, we have lost count of the number of our clients who have, through the help of a GOOD finance broker, found a better deal on their existing home loan, which has saved them sometimes an amazing amount of money.
Do you think their bank was going to let them know they had a better loan product available which would save them money? No way! You think the bank would let them know that, actually, their competitor down the road has a much better offer right now? Fat chance. But you would be shocked at how many people are paying too much for their home loan, simply because it's too complicated and time consuming to compare every one of the hundreds of options available at any time. So people continue to overpay, and the banks keep making bigger and bigger profits.
We’ve worked with dozens of different finance brokers over the years, and yes, we know very well that some are better than others. But in our experience, the good ones do actually act in your best interest (without the law forcing them to) and help you to find and secure the best loan available, specifically for you.
Why not punish and get rid of brokers who don't do their job properly, and ensure all brokers are required to act in your best interests, above all else, so you can continue to benefit from a valuable service. If not, it will simply add to the major banks' bottom line - and that's the last thing they deserve.