We all like to shop around, compare and make sure we’re getting the best mortgage interest rate, but the introduction of online mortgage application and comparison sites is increasing the number of non-funded loan application.
Online mortgage sites affect your credit history
Multiple applications across online, branch and mortgage broker is doing more harm than good. Many consumers don’t know that under the guise of ‘simplicity and ease’, online mortgage application and comparison sites are actually processing a credit check on the borrower during the research phase. This credit check is recorded on the borrower’s credit history and can affect the final application, once all the ‘research’ is done.
A mortgage is your biggest financial commitment – why would you trust an algorithm?
The unfortunate reality of online mortgage sites is the person behind the website is likely to be inexperienced in mortgages due to the high volume of application processing. They rely on algorithms to assess a borrower’s capacity and loan suitability, and the outcome of the application can be negative because they don’t know what they are doing.
Just like when Aussie advertised the fact that their mortgage brokers often had no previous lending experience, online mortgage sites have the potential to do more damage to an industry where experience and knowledge is key to a positive outcome.
I don’t know about you, but when I sign up to borrow $1,000,000 to buy a property, I want to know that the person guiding and advising me has experience and knows what they are doing.
Sure, compare interest rates online, but for goodness sake, don’t give them any of your personal details.
Multiple applications do more harm than good
Latest findings from Digital Finance Analytics (DFA) and data collected from 52,000 households showed that more multiple applications are being made to a portfolio of lenders in an attempt to get a single loan approved.
“The multiple applications are on the rise, and are facilitated by easier online processes and systems,” principal Martin North told publication Mortgage Business.
“They are talking to mortgage brokers and potentially putting applications in via brokers but also putting applications in themselves. It’s creating a lot of noise in the system.”
The problem is consumers think this is a good thing, but shopping around can have a detrimental affect on the borrower. Some online mortgage sites commence the application process via credit enquiry to test the customer’s borrowing ability before the customer is even aware. When the final mortgage application is submitted, the lender does a credit check and if there have been too many credit enquiries, the lender will decline the application. This can often be because the lender assumes there is something wrong with the borrower because they have sought so many requests for credit.
Aren’t online comparison sites just competition for mortgage brokers?
When we started Mint Equity, it was because we had worked for the big banks who kept pushing unsuitable products on the customer. Their approach was unethical, and we didn’t agree with it. There are approximately 7,000 mortgage broker businesses in Australia, so we accept and encourage competition, on one condition; as long as their approach is in the consumers’ best interest.
Unfortunately, online mortgage application and comparison sites are not in the consumers best interest. They will never talk through a lending strategy at 9pm on a Sunday night, or drive to see a client 3 hours away or discover that their accountant buggered up their tax return because their mortgage broker read every page of their company accounts to ensure the loan application was the best it could be.
All we ask is that if you are going to shop around, be careful and don’t provide your personal details through an online site. Find out who you’re talking to and what their experience is. Check they are qualified and have industry experience. Trust us, any good mortgage broker can get you the same, if not better, interest rate that online comparison sites advertise.