Choosing which loan structure is best for you depends on your personal situation, possible changes in income or expenses, and your short term expectations with your property. Your overriding approach should be to understand that fixed interest rates are a risk management tool; they are not necessarily a way to save money. Do not try to second guess the interest rate market. My rule of thumb is that 80% of the time lenders will end up ahead on any fixed rate loan contract, simply because they understand money markets much better than their customers.Read More
In what has been described as “an opportunistic attempt to to reduce competition in the Australian mortgage market”, CBA CEO Matt Comyn has disingenuously led the Royal Commission Into Financial Services Industry to form the view that Mortgage Brokers are paid trailing commissions, but not required to do any work to receive them.
To help Mr Comyn to better understand the industry at grass roots level, I have prepared for him the following definition of “no work”.
“The No-Work” Carried Out By Mortgage Brokers in Return for Trailing Commissions
Maintain a local office to service clients
Employ staff to help cater for post settlement service enquiries on loans under management
Continuing Professional Education (min 30 hours per year)
Maintain Professional Indemnity Insurance
Conduct regular client loan reviews
Keep the banks honest – negotiate regular interest rate reductions as a bulwark against lenders’ practices of creeping rate margins
Assist clients with loan increases/ restructures / loan discharges
Prepare client claims on loans with progressive payments (construction loans)
Provide financial education via client newsletters and market updates
Help clients with debt scenarios and calculations when they are trying to make plans for the future
Provide local personalised service where clients do not wish to wait in long phone queues to ask a bank call centre questions about their loan
Act as advocates to help clients resolve bank errors to their satisfaction
all of the above are done while a Mortgage Broker meets all the costs of running their own business including IT systems (hardware and software), communications systems, stationery, public liability insurance, staff benefits including training, superannuation and annual leave, accounting systems, services subscriptions, aggregator fees, transport, utilities, mail and couriers and marketing.
Trailing commissions provide an important component of cash flow stability which help to keep broking businesses viable, and staff employed in a fluctuating market. They exist for the same reason that bank interest margins do.
Not every broker will do all of the above but then neither is every company CEO as diligent or effective as their industry peers in properly managing their businesses, recognising problems and addressing them courageously and ethically in the interests of all stakeholders.
The events at the Royal Commission this week have been likened to throwing mortgage brokers under a bus. In fact it has become a little crowded under that bus this week.
"To throw (someone) under the bus" is an idiomatic phrase in American English[dubious – discuss] meaning to betray a friend or ally for selfish reasons. It is typically used to describe a self-defensive disavowal and severance of a previously-friendly relationship when the relationship becomes controversial or unpopular or inconvenient. (1)
Wikipedia - Throw under the bus
The peak body for Mortgage Brokers, the MFAA has issued a strong defence of the current lending industry structure following bad publicity emanating from the Royal Commission into the banking sector. Whilst nearly all of the bad behaviour exposed by the Commission has fallen directly at the feet of the banks, some of the major banks have tried to use the commission as an opportunity to wrest back control of the lending market.Read More
The dust now appears to be settling after the latest round of interest rate volatility which we have seen during the course of the past 4 months. All major lenders have made dramatic changes to interest rates and lending criteria for new and existing borrowers preferring interest-only loans. How should borrowers respond?Read More
One way to purchase property is to buy off the plan. This is where a buyer enters into a contract to buy a property before it’s completed – usually as part of a multi-unit development. And while there are benefits to this, there are also risks.Read More