Listen to the article here voiced by Steve Donnell
The perception that mortgage brokers earn exorbitant fees, making their services a poor value for borrowers, is inaccurate and misleading.
Let’s explore why this notion is flawed.
Mortgage brokers provide significant value to consumers by offering access to a wide range of lenders and mortgage products. They often secure better rates and terms than borrowers could find on their own, saving clients time and effort by managing the complex loan application process. Contrary to the belief that borrowers pay for brokers’ services, brokers are typically compensated by lenders, not borrowers.
This means borrowers benefit from brokers’ expertise without incurring additional costs. Brokers’ remuneration is tied to the work involved. This incentivizes brokers to secure the right loan facility and structure, often negotiating better rates and terms for their clients. The competition generated among lenders benefits borrowers by providing more favourable mortgage options. The finance industry is tightly regulated, with brokers required to act in the best interests of their clients. This ensures that brokers prioritize their clients’ needs, over their own financial gain dispelling the myth Banks have you believe, thus mitigating potential conflicts of interest. Successful mortgage brokers thrive by delivering value to customers and achieving positive outcomes.
Like every business owner, the costs of operating a broking business have increased, whilst the Banks have maintained commission rates which not been adjusted for over six years, despite added operational expectations from banks. Brokers also face ‘clawback’ provisions imposed by the banks. This was established to circumvent ‘churning’ Home loans to give greater control to the banks for retention, where commissions can be reclaimed back from the mortgage broker if a loan is paid out within two years, regardless of the broker’s involvement. So in effect the finance provider avoids the question why a client would want to move to another provider in such short time frames, which is usually because of frustration over service levels; interest rate competitiveness or unable to assist with subsequent variations.
Comparing brokers’ earnings to median salaries, without considering the value and savings they provide to borrowers, is misleading. Brokers’ expertise often leads to substantial long-term savings for clients, far outweighing their commission costs. Finance providers, in contrast, frequently reduce staffing levels to improve their bottom line, pushing customers towards online services, which can lead to frustrating experiences, and hence why the mortgage broking industry has grown so rapidly. It’s clear that personalized service and a deep understanding of client lending requirements, are key factors driving customers to seek finance professionals to help them navigate through the home loan process. Mortgage brokers offer essential services that provide value, convenience, and competitive mortgage options to borrowers, all without direct costs to the consumers they serve. The experienced mortgage broker values the client relationship hence why most offer to provide assistance and guidance, well after the home loan transaction has been completed. The notion that their fees are exorbitant and detrimental to borrowers, misrepresents the true benefits brokers deliver.
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Join us to uncover why the lowest rates might not always be the best option for your financial situation.
