Brokers beating banks with loan renegotiation

Original article by Australian Broker Magazine

Mortgage broker clients are overwhelmingly more likely to renegotiate their mortgage rates after five years, a new survey has found.

A KPMG report, entitled The Australian Home Loan Market, polled 622 ‘mass affluent’ professionals earning between $70,000 and $250,000 per year and found that 44% preferred using the broker channel for home loan origination.

Of these, 67% renegotiated their interest rates at least once every five years. This was 16% higher than the 51% of those who renegotiated their home loan rates through the bank’s proprietary channels.

Total numbers were lower across banks and brokers, with 61% of all respondents renegotiating their home loans or switching banks at least once every five years.

There are many reasons why broker clients changed their rates or mortgage products more often than the banks, Geoff Rush, partner in management consulting and co-author of the report, told Australian Broker.

“Given residential property prices, the current high level of indebtedness of Australian households and questions about the affordability of residential property are hot topics at the moment, it does not surprise me that this encourages borrowers to shop around to find home loan deals that best suit their particular needs.”

Trail commission may also be a contributing factor with brokers inclined to contact their customers to see if they could locate a better deal, he added.

Choosing your broker

Age plays a major role in whether a respondent was more likely to use a broker over the banks. Those aged 30 to 49 had the greatest preference at 45% compared with 31% for those aged 21 to 29 as well as 29% of those aged 50 to 65.

Factors deemed most crucial for those choosing a broker included wanting to find the best deal (51% of respondents), seeking an easier loan application process (29%) and choosing someone with a solid reputation (14%).

“The data from our research suggests the key factor behind the increasing use of brokers for home loan origination is the perception that brokers can offer a better deal (price and product features) because they work with multiple lenders and therefore can find an offering which better fits with the end customers’ needs,” Rush said.

Renegotiating your loan

Mortgage brokers can renegotiate interest rates and terms with the client’s existing lender as well as assisting with the origination of a new loan. When a client is happy with their lender but unsure if they have the best interest rate, a mortgage broker can negotiate directly with the lender on the client’s behalf.

The real value of a mortgage broker is their knowledge and relationships with lenders. Often lenders will offer ‘under the counter’ promotional interest rates to brokers rather than spending money on consumer advertising to promote. Mortgage brokers can leverage these promotional rates in their negotiation with the lender and often the potential of the client moving to another lender is enough for the lender to offer a better deal. 

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