The banking and mortgage broker industries have a direct impact on consumers, so when changes happen, it’s important you know how they will affect you.
Inexperienced mortgage brokers blocked from CBA
Commonwealth Bank has announced that from 2018, it will no longer accept accreditations from new mortgage brokers with less than two years of experience or from those who don’t hold a Diploma in Finance & Mortgage Broking. CBA stated that more experienced mortgage brokers provide better consumer outcomes and that there was a huge turnover of new brokers in the industry.
That means, any new mortgage brokers who don’t fit the criteria, can’t become accredited with CBA and can’t offer clients CBA’s products.
It is likely that other lenders (particularly the big four) will also put accreditation restrictions in place.
What we think
This is excellent news for the consumer! Unfortunately, the rise of online lending platforms and part-time mortgage brokers in our industry has devalued the industry. Even Lendi.com openly recruit new mortgage brokers with ‘no experience necessary’. Mint Equity director, Zac Peteh, has 23 years banking and finance experience – which is invaluable to his clients to ensure they get the right finance solution. He is accredited with all the major banks and most second-tier lenders. Always check your mortgage broker’s experience and lender accreditations to ensure you’re getting the best service.
Cowboy mortgage brokers being pushed out of the industry
Unfortunately, our industry attracts inexperienced people who think they can make quick money by becoming a mortgage broker. This has led to some unsavoury characters and practices within our industry, who focus on volume rather than quality of service. Last year, several reports were provided to ASIC and the government recommending a series of changes to the way mortgage brokers were paid.
Some banks incentivise mortgage brokers by giving them a volume bonus based on the number of loans settled with the lender. This month, some banks have started to removed volume based bonuses to curve poor behaviour. We’ll start to more changes to the way mortgage brokers are paid, however it’s unlikely that consumers will be forced to pay for mortgage broker services as the government sees clear value in offering a free service to source the best consumer outcome.
What we think
Mint Equity has never aspired to, nor received any volume bonuses. We think removing volume based bonuses is excellent to ensure consumers get the right options, not the highest paid options.
We don’t charge our clients for our services as we are remunerated by the lender our client selects. Whilst some mortgage brokers do charge or ‘mandate’ fees for their services, our conversion rate of approvals means we have a higher success rate than many others - therefore, we don't believe we need to charge our clients for our services.
All your credit data will be shared across all lenders
The big four banks will now be required to implement mandatory credit reporting from July 2018, which will boost the amount of information available in credit files, including home loan limits and repayment history.
That means if you have a good credit history, you are likely to find sourcing credit in the future easier and potentially cheaper as you will be considered a low risk applicant. If your credit history and activities aren’t great, lenders will now have full visibility of your credit behaviour and make it harder or more costly for you to secure finance in the future.
What we think
Reality is, it’s really easy to get a black mark on your credit report. A missed bill or maybe your direct debit card expired and suddenly you’ve been flagged as a credit risk. Shared credit data can be a good thing, particularly for those with a strong credit rating as it’s likely lenders will want your business and be willing to offer discounts to win it. Regardless of whether you are looking to secure a home loan or not, Australians need to become more organised and monitor their activities to ensure they don’t have any nasty surprises later on. To learn more about the changes, read our article Home loans and credit scores – are you paying more because of your credit score?
Mortgage brokers will be included in banking Royal Commission
Although the industry has had two significant reviews in the past 18 months, (ASIC broker remuneration review and the Sedgwick report), the government has included mortgage brokers in Royal Commission. To learn more about the Royal Commission, read our article What the Royal Commission means for customers and shareholders
What we think
It’s not surprising that the commission will cover the third-party channel, given that more than half of mortgages are now written by brokers.
Neither of the two reviews conducted last year found systemic poor outcomes or systemic harm to consumers, so we don’t believe the commission will report any differently.