Mortgage brokers are vital to the vibrant mortgage industry. Mortgage brokers create competition between lenders. Unfortunately, some uncomfortable facts came out during the Royal Commission, which resulted in the recommendation to stop lenders from paying any commission to mortgage brokers. This recommendation is intended to ensure the mortgage brokers keep customer interest the foremost.
The recommendation was to change how lenders remunerate mortgage brokers. Lenders compensate mortgage brokers. Lenders remunerating mortgages brokers results in a conflict of interest since the mortgage broker’s primary role is to work for the consumer. Read more on our blog to understand how to get unbiased mortgage advice.
It isn’t easy to find a mortgage broker who puts consumer interest first. There are regulations to govern mortgage brokers. Unfortunately, many loopholes exist in the law.
A consumer can ask questions to a mortgage broker to ensure the mortgage broker is indeed working for the consumer and not the lender. These questions, when answered promptly by a mortgage broker, allows the consumer to make an informed decision.
Q1 – How many lenders are you accredited?
A mortgage broker claims to have access to a large panel of lenders. While this may true, it is essential to check if they have access to a large panel of lenders.
Mortgage brokers use a mortgage aggregator. A mortgage aggregator is an intermediary between lender and mortgage broker. Mortgage aggregator works with several lenders and provides services such as the ability to submit a mortgage application, the ability to collect a commission from a lender etc.
Mortgage broker’s claim panel of lenders based on the aggregator they use. Having access to a lender through an aggregator does not automatically provide the mortgage broker with access to the lender. A mortgage broker is mandated to get accredited with a lender before they can offer a mortgage product from the lender.
Therefore, the question that you must be asking the mortgage broker is – how many lenders are you accredited? The answer is the real lender panel that the mortgage broker has access to and hence can only offer you mortgage products from them.
Q2 – Can you provide me with offers from every lender in your panel?
Once you understand the lender accreditation of the mortgage broker, you must insist on seeing an offer from each of those lenders. While this is what your mortgage broker may claim to have done, surveys across the industry and the findings from Productivity Commission and Royal Commission have indicated that mortgage brokers have 3 to 4 favourite lenders.
By law, a mortgage broker must propose three mortgage offers from different lenders to allow the consumer to make a choice.
The Productivity Commission report found that mortgage brokers always offered mortgages from 3 to 4 favourite lenders even when a better suited, and the cheaper product was available with another lender. The favourite lender may have got the tag of favourite due to additional monitory benefits they might be offering to the mortgage broker. This is not in the customer interest.
It is recommended to insist on getting an offer from each of the lenders from the lender panel. This provides the consumer with the choice to find the best-suited mortgage with help from a mortgage broker.
Q3 – Can you provide me with the commission you earn from each lender on your panel?
It is essential to be aware of the commission earned by a mortgage broker for the mortgage product. By law, a mortgage broker must disclose the commission earned for the recommended mortgage.
While the mortgage broker may disclose the commission earned for the mortgage they recommend, they are not obligated to reveal commission for a similar mortgage product from other lenders. This information is not mandated by law to be revealed.
This is critical information for the consumer. This information will allow a consumer to understand if the mortgage broker is biased towards a lender due to a higher commission amount.
How can FairBroker® help?
On FairBroker®, we solve the above questions. The consumer is allowed to create a request seeking a mortgage anonymously. This request is then shown to thousands of mortgage brokers encouraging them to offer mortgages from a wide range of lenders. On FairBroker®, a consumer on average gets 60 to 70 mortgage offers from various lenders.
Each mortgage offer has the commission details earned by a mortgage broker. This transparency with information puts the consumer in charge. The consumer can now compare and select the best mortgage deal in Australia.
It is our mission to ensure transparency and the best outcome for the borrower and hard-working mortgage broker. Looking for a mortgage or looking to refinance your existing mortgage? Create a deal request on FairBroker® and get unbiased mortgage advice and assured commission share from mortgage brokers.