The current Royal Commission into the finance industry has certainly shed some light on the banking system at large. From a lending perspective, it now makes more sense than ever to use a good Mortgage Broker, and not deal directly with the lender.
For many years now, I have been heralding the fact that Banks and all financial institutions exist to make money. They have no reason or responsibility to get you the best that they can, only to offer a product ‘just’ good enough to make you choose them. Most of these institutions are listed on the ASX and have responsibilities to their shareholders to make a profit, to pass onto their owners. So, when a customer visits one of these institutions, the sale’s person across the desk doesn’t have the client’s best interest at heart, just the need to make a profit. Why else would some of these lenders be now exposed by charging even deceased estates with services that were never provided?
Take a small business Mortgage Broker or Finance Broker however, and the tables flip. These businesses exist to provide a service, of obtaining finance for the client, and yes an income is made form this also. However, these small businesses survive on reputation, and doing the best they can for each client’s circumstance. It makes no sense to see a client, and get them a loan that doesn’t suit them or is too high a rate, as this client will then not recommend them to other people, and help promote the business. Nor will they come back and re-visit them in the future. So, the livelihood of the Mortgage or Finance Broker relies much more strongly on successful recommendations and good recommendations. Not just one, but both.
The Mortgage Broking industry has a Combined Industry Forum, established to ensure that we do the best we can. They have recently come up with a basic rule for a good outcome for a home loan, which reads:
“To recommend to you a loan that is appropriate (in terms of size and structure), is affordable, applied for in a compliant manner and meets your set of objectives at the time of seeking the loan.”
It is just clarification of what we have been doing for many years now and in light of the Royal Commission showing that Brokers are best…