Using a mortgage broker is becoming more popular.
Mortgage brokers are becoming more important in the home buying process.
As banks are changing their lending policies and their interest rates regularly at the moment, using a mortgage broker to cut through the new lending landscape is on the rise.
The proportion of consumers seeing their current financial institution first in the home loan application process has dropped recently from 60 per cent to 44 per cent.
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There is still plenty of room for brokerage expansion as just 28 per cent of home buyers used a mortgage broker when they purchased a home or investment property, data from Mortgage Choice and CoreData’s new Evolving Great Australian Dream 2018 whitepaper has shown.
Buying a home can often be confusing due to the new lending landscape.
This was up from 16 per cent annually, so the momentum is obvious. The highest mortgage broker usage comes from home buyers aged 45 and under.
Historically professional property investors have also used brokers along with higher risk borrowers, such as the self employed.
As the major lenders retreat to safer borrowers, a mortgage broker has access to a wide panel of potential lenders for anxious borrowers.
Brokers will have access to details such as which lenders have black-listed certain postcodes, apartment projects or property types such as student apartments or studio apartments.
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The Royal Commission into Misconduct in the Banking, Superannuation and Financial Services Industry has certainly made it harder to secure a loan but there are still cheap interest rates.
Brokers will negotiate for the best rate, and take care of the rise in financial paperwork which is now required before approval.
Borrowers do not pay for the mortgage broker because they take payment from the lender when the loan is secured.
Nearly 30 per cent of buyers used a broker when purchasing property in the past year.
Mortgage brokers secure an average $4,600 commission on a loan, research by investment bank UBS advised last year, with equity analysts and shareholders keen to rebalance loan flows towards internal channels.
Nearly $2.5 billion commission was paid to brokers by banks in 2015, which UBS said was “disproportionate for advice provided on a simple, commoditised, single product”.
The mortgage broking industry has recently revised its commissions, responding to concerns that the incentive commissions risked customers being encouraged to borrow more and for longer than they needed.
The industry has agreed it was dishonest to give advice that does not serve the client’s interest but profits the adviser.
Volume-based incentives in mortgage lending were identified during the banking Royal Commission as not meeting community standards, nor delivering the best results for customers.
“The ASIC Review, the Sedgwick Review, the Productivity Commission and the Royal Commission have all shown us that the industry has a problem with these types of payments that may encourage customers to borrow more than they need,” the Australian Banking Association chief Anna Bligh conceded.
When it comes to outright fraud, rather than advice for the wrong reasons, ASIC has secured just 15 convictions of brokers between 2010 and 2017, which represents 1 in 9,000 brokers per annum.
Brokers help buyers find the best rate.
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There has been a flurry of convictions in recent weeks.
Not too much misconduct, but there are rising concerns of mortgage brokers now seeking real estate licences so they can continue to receive referral commissions from off the plan property developers.
These kickbacks see typical referral fees of $5000 to $10,000 upon completion of the sale.
The NSW Government is moving to prohibit advisers taking referral commissions unless they also hold a real estate licence.
There’s no harm in asking your broker on where their commission entitlement is coming from.
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