Property buyers are increasingly turning to mortgage brokers

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Excuse the humble brag, but property buyers are turning to mortgage brokers in record numbers. Here’s why that’s great news for the both of us.

Ok, ok, sure, we know we’re beating our own drum a little here.

But there’s a good reason why, we promise.

Firstly, it’s fantastic to see that at a time when the royal commission is dominating headlines and consumer confidence in the big banks is tanking, our industry is proving worthy of people’s trust.

During the September 2018 quarter, mortgage brokers settled an unprecedented 59.1% of all residential home loans.

That’s up from 53.6% in 2016 and 55.7 per cent in 2017 over the same period.

MFAA CEO Mike Felton points out that the result reflects not only the trust and confidence customers have in their mortgage broker, but the systemic importance of the mortgage broking industry.

“As banks have persisted in making it more difficult to secure a loan, turning many would-be borrowers away, consumers have continued to increasingly utilise the broker channel for experience, expertise and greater market choice to secure access to credit,” Mr Felton says.

Take that, banks

The figures emerge as the big banks continually try to curb the effectiveness of mortgage brokers. And it doesn’t take Einstein to figure out why: mortgage brokers promote a more competitive lending market at their expense.

According to Deloitte Access Economics, over the past three decades brokers have contributed to the fall in net interest margin for banks of over 3% points. This saves you $300,000 on a $500,000 30-year home loan (based on an interest rate fall from 7% to 4% pa).

Furthermore, on average, mortgage brokers have 34 lenders on their panel, and 28% of the time arrange residential loans through lenders other than the big four banks.

“In addition to providing customers access to a panel of 34 lenders on average, brokers are ideally positioned to help customers, especially those with more complex lending scenarios, to understand the ever-evolving application process and provide the information necessary to meet changing lender requirements,” adds Mr Felton.

Current model under threat

There’s been a recent push by at least one of the big four banks to make the customers pay for the services of a mortgage broker. If they had their way, that would be an industry-wide standard.

However, news that more and more customers are flocking to mortgage brokers under the current system will hopefully help us both out in the long run.

Better yet, a recent report shows that 9 out of 10 customers are satisfied with the services provided by mortgage brokers, so we sincerely thank you for your support.

Got a minute help us out a little more?

Besides continuing to use our services, and recommending us to family and friends, another way you can support us is by contacting your local MP to let them know you’re happy with the mortgage broking service we’re currently providing.

By letting your local Federal Member of Parliament know this you can help prevent the cost of our future services being transferred from the bank over to you – and you’ll also be showing your support for us.

If you’d like any more information on this issue don’t hesitate to get in touch. We’d love to speak to you more about it.

Disclaimer: The content of this article is general in nature and is presented for informative purposes. It is not intended to constitute financial advice, whether general or personal nor is it intended to imply any recommendation or opinion about a financial product. It does not take into consideration your personal situation and may not be relevant to circumstances. Before taking any action, consider your own particular circumstances and seek professional advice. This content is protected by copyright laws and various other intellectual property laws. It is not to be modified, reproduced or republished without prior written consent.

New Year, New You!

Each year we make New Year’s resolutions that focus on our health and wellbeing. But how often do we think about improving our finances? Here are five financial New Year’s resolutions that could help you start 2019 with a bang!

You might have missed it over the silly season, but the good news for mortgage holders is that many economists are tipping that we won’t see the RBA announce a rate rise in 2019.

Indeed, three leading economists now believe we may even see an interest rate cut this year. (Although, as we saw in 2018, that doesn’t necessarily mean the banks will follow suit).

But instead of sitting around waiting for the RBA and the banks to make a move that could save you money, here are five New Year’s resolution ideas to help you out in 2019!

Resolution idea #1: Cut back on the credit card purchases

The average card holder is paying around $700 in interest per year if their interest rate is between 15 and 20%, according to ASIC.

That $700 is nothing to sneeze at. It’s enough to purchase a new suit or outfit to help you land that new job, fund a year’s worth of home and contents insurance, or take the family on next summer’s camping trip.

Additionally, as of January 1, banks and credit providers are now required to check your debt-servicing capacity more thoroughly before issuing a credit card.

That means if you’re planning to load up on one credit card, and then transfer the debt to a card with a lower interest rate, you might find yourself out of luck.

With that in mind, the next question to ask yourself is: do I really still need a credit card if a debit card will suffice?

Resolution idea #2: Get a home loan health check

Whether the rates go up, down, or stay where they are, it never hurts to get a home loan health check to make sure there’s not a more suitable home loan out there for your situation.

Because while the RBA kept their rates on hold throughout 2018, not all banks did too.

In fact, every single one of the Big 4 Banks increased interest rates in 2018. To make sure you’re still happy with the rate you’re paying compared to what’s available in the market, give us a call.

Resolution idea #3: Purchase less take-away coffees, alcohol and other items

Buying a $4 take-away coffee each day costs you a whopping $1460 per year. Making it yourself using a French Press or Moka Pot can cost just $260 – a saving of $1200.

The lure of micro-transactions – purchases that are low in cost and trivial in nature – can be a real obstacle for those trying to achieve their financial goals.

Other micro-transactions that most families can cut back on include alcohol, take-away food, gym memberships, and multiple entertainment subscriptions such as Spotify, Netflix and Foxtel.

Resolution #4: Ask your employer about salary sacrificing

Salary sacrificing – also known as salary packaging – is generally tax-effective for people who earn more than $37,000 a year.

It helps you save on tax by allowing you to forego your salary in return for non-cash benefits, including car leases, childcare, student loans or superannuation contributions.

It all depends on your employer and the industry you work in but there are three broad categories of things that can be packaged: things that attract fringe benefits tax (FBT), those which do not, and superannuation.

If you’re interested in exploring your options, make an appointment with your employer when you get back into the office this month to see if they can make it work for you!

Resolution #5: Review your insurance, superannuation and banking costs

Whether it’s your home and contents insurance, your car insurance, or a life insurance policy, by calling three or four insurance companies, getting quotes, and then comparing, you can save hundreds of dollars each year.

While you’re at it, make sure you don’t have more than one superannuation fund. If you do, consolidate it by following these steps to avoid doubling up on fees.

Finally, look into your banking fees. Just like a home loan there’s often a better deal out there, so make sure your bank isn’t taking you for a ride!

Final word: Set a financial goal

If you’re not back at work yet, then use this precious time to carefully consider what financial goals you want to achieve in 2019.

It could be saving up for a long overdue holiday, putting away more money towards your kids’ education, or buying an investment property.

If you’re stuck for ideas, come in and have a chat to us. We’d be more than happy to help you identify goals, and can also help with some of the suggestions listed above.

Disclaimer: The content of this article is general in nature and is presented for informative purposes. It is not intended to constitute financial advice, whether general or personal nor is it intended to imply any recommendation or opinion about a financial product. It does not take into consideration your personal situation and may not be relevant to circumstances. Before taking any action, consider your own particular circumstances and seek professional advice. This content is protected by copyright laws and various other intellectual property laws. It is not to be modified, reproduced or republished without prior written consent.

APRA to remove restrictions on interest-only home loans

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Here’s some good news to kick off 2019: APRA is removing its restrictions on interest-only residential mortgage lending from January 1.

The restrictions were put in place as a temporary measure by the Australian Prudential Regulation Authority (APRA) back in March 2017 to encourage lenders to adopt sound lending practices.

So why are they being removed now?

APRA’s announcement comes just weeks after CoreLogic figures showed Australia’s housing market recorded its weakest conditions since the Global Financial Crisis (GFC).

National dwelling values slipped by 0.7% over the month, led by Sydney where the drop was double the national average.

As such, many pundits believe the restrictions are being lifted to prevent the housing market from sinking further.

APRA, however, is claiming it’s simply a case of ‘mission accomplished’.

It says the restrictions have already led to a marked reduction in interest-only lending, which is now significantly below the target of 30% of all home loans that lenders issue.

Is the restriction removed for all lenders?

Most, but not all.

Earlier this year APRA announced it would remove its 10% restriction on investor loan growth for lenders who could prove they had strong lending standards.

Lenders who have passed this test will also no longer face restrictions on interest-only home loans.

But for lenders that haven’t yet proven the strength of their lending standards, the restrictions will remain in place until they do so.

“APRA’s lending benchmarks on investor and interest-only lending were always intended to be temporary,” says APRA Chairman Wayne Byres.

“Both have now served their purpose of moderating higher risk lending and supporting a gradual strengthening of lending standards across the industry over a number of years.”

What does this mean for you?

With the restrictions lifted, it should now be easier for borrowers to secure an interest-only loan from January 1.

If that sounds like something you’d be interested in, give us a call. We’d love to help out.

Disclaimer: The content of this article is general in nature and is presented for informative purposes. It is not intended to constitute financial advice, whether general or personal nor is it intended to imply any recommendation or opinion about a financial product. It does not take into consideration your personal situation and may not be relevant to circumstances. Before taking any action, consider your own particular circumstances and seek professional advice. This content is protected by copyright laws and various other intellectual property laws. It is not to be modified, reproduced or republished without prior written consent.

Season’s Greetings! Wishing you a prosperous 2019!

Didn’t 2018 just fly by? And what a year it was too!

The RBA left the official cash rate on hold at 1.5% throughout the entire year – but that didn’t stop the banks sneaking in the odd rate rise of their own.

APRA cracked down on the banks to tighten their lending standards – which has made it a little harder to obtain finance if you don’t have your ducks in a row.

And the Royal Commission shone its spotlight on serious misconduct and poor lending standards by some of Australia’s biggest banks – which will hopefully only continue to improve competitiveness amongst lenders moving forward.

Recap aside, we are sincerely thankful for your support over the past twelve months.

It’s been an absolute pleasure working with you towards your finance and lifestyle goals.

Whether you’re celebrating the festive season with family and friends, or getting away somewhere nice and relaxing, we hope you have a wonderful break over the summer holidays.

Here’s to a prosperous 2019!

We look forward to working with you again in the year ahead.

Disclaimer: The content of this article is general in nature and is presented for informative purposes. It is not intended to constitute financial advice, whether general or personal nor is it intended to imply any recommendation or opinion about a financial product. It does not take into consideration your personal situation and may not be relevant to circumstances. Before taking any action, consider your own particular circumstances and seek professional advice. This content is protected by copyright laws and various other intellectual property laws. It is not to be modified, reproduced or republished without prior written consent.

Banks’ unclear pricing costing frustrated borrowers thousands

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Borrowers who don’t shop around due to the banks’ unclear pricing tactics are losing out on an average of $850 a year, an ACCC report has found.

Get a load of this: there’s this tactic that the big four banks (ANZ, CBA, NAB and Westpac) use that makes it “difficult” and “frustrating” for borrowers to discover their best home loan offer.

The tactic is called discretionary pricing, and the Australian Competition and Consumer Commission (ACCC) has just released a scathing report on it.

So what is discretionary pricing?

The banks don’t really advertise their best home loan deals. But there are two kinds of discounts that they do offer.

The first is their “advertised discounts”, which are generally published on their website and relatively easy for borrowers to discover.

The second is “discretionary discounts”, which are much harder to find.

Discretionary discounts are offered on a case-by-case basis to individual borrowers, usually after the lender has assessed their application.

However, the criteria for discretionary discounts is generally not disclosed to borrowers.

So what’s the problem?

Basically, the banks are intentionally making it pretty damn hard and time-consuming for borrowers to obtain accurate lowest interest rate offers from multiple lenders.

In doing so, they’re hoping you’ll just get too frustrated and put the whole ‘searching around for a better deal’ thing in the too-hard-basket.

The ACCC says that’s how it was for 70% of recent borrowers from one bank – they obtained just one quote before taking out their residential mortgage.

“The lack of transparency in discretionary discounts makes it unnecessarily difficult and more costly for borrowers to discover the best price offers,” says the ACCC.

“This adversely impacts borrowers’ willingness to shop around, either for a new residential mortgage or when they are contemplating switching their existing residential mortgage to another lender. The unnecessarily high cost that prospective borrowers incur to discover price information from lenders causes inefficiency.”

How effective is this tactic?

Extremely so.

The rate of borrowers switching lenders remained extremely low last financial year.

In fact, less than 4% of borrowers with variable rate residential mortgages with the top five banks refinanced to another lender, says the ACCC.

That’s just 1 in every 25 mortgages.

(It’s also worth noting that only 11% of people got a better home loan deal from their current bank by either asking for it or being offered it.)

“The big four banks profit from the suppression of borrower incentives to shop around and lack strong incentives to make prices more transparent,” says the ACCC.

How much are these opaque tactics costing some borrowers?

In two words: A lot.

The ACCC believes an existing borrower with an average-sized residential mortgage who negotiates to pay the same interest rate as the average new borrower could initially save up to $850 a year in interest.

“This could add up to tens of thousands of dollars over the full term of their residential mortgage in net present value terms,” the ACCC adds.

So will the banks stop doing it?

Unlikely. Well, anytime soon that is. Here’s what the ACCC say about it:

“At least one Inquiry Bank appears to be aware of borrower frustration with discretionary pricing. There is little evidence of any Inquiry Bank responding to that frustration by moving away from the practice,” the ACCC says.

“More generally, the Inquiry Banks, particularly the big four banks, lack a strong incentive to reduce the cost that prospective borrowers incur to discover price information because they profit from the suppression of borrowers’ incentives to shop around.”

So what can I do about it then?

That’s the easy part. Get in touch with us to discuss your refinancing and/or renegotiating options.

By teaming up with us, not only can you save yourself the headache of having to research what each lender’s best available discount is, we will happily negotiate for it on your behalf.

So if you’re interested in potentially cutting down the amount of interest you pay each year, give us a call today.

Disclaimer: The content of this article is general in nature and is presented for informative purposes. It is not intended to constitute financial advice, whether general or personal nor is it intended to imply any recommendation or opinion about a financial product. It does not take into consideration your personal situation and may not be relevant to circumstances. Before taking any action, consider your own particular circumstances and seek professional advice. This content is protected by copyright laws and various other intellectual property laws. It is not to be modified, reproduced or republished without prior written consent.