What the banks don’t want you to know about mortgage brokers
Think you have secured the lowest possible rate for your home loan with your bank? Then think again…
Friday, June 24, 2016 Last Updated on 24 June 2016
Do you know what banks don’t want you to know? Banks work with two different kinds of clientele – direct customers (which is you) and mortgage brokers.
While direct customers may be offered lower rates because banks like to keep their customers intact, it is rare you can ever lock in a loan at the same rate as a mortgage broker could. Simply because mortgage brokers do most of the pre-qualifying work on a loan application, they have access to far lower rates than are usually advertised to customers.
Apart from offering higher interest rates, banks, especially the big 4 have underscored in terms of customer satisfaction as well. According to a report by Roy Morgan, the customer satisfaction level of home loan customers of the big 4 banks is less than 80%. On the contrary, a survey by Mortgage and Finance Association of Australia (MFAA) revealed that 92% of the participants were ‘fairly’ or ‘very’ satisfied with the service provided by their mortgage broker, many of them likely to recommend their broker to family and friends.
Another report by MFAA published in 2015 brought out that many lenders believed more than 60% of home loan deals in the future would be through mortgage brokers. So what is it that is making the brokerage channel much more preferable over conventional lenders?
As per our research and analysis, it boils down to three essentials – Choice, Interest Rates and Satisfaction. Let’s see how.
Every borrower wants to secure the lowest possible rate; and despite popular advice to negotiate rates with lenders, it is hardly ever possible to substantially negotiate rates advertised by the banks.
As mentioned before, banks deal with two kinds of clientele – the borrowers and the brokers. The brokers, because they do a lot of pre application work, get much better rates on loans than what is advertised for regular customers by the banks.
Further, many brokers also pass on the commission they receive from banks to clients, which can easily amount to few thousand dollars.
So how do you go about finding the best rates?
Quite simply, by comparing several home loan deals and going for the lowest possible rate with all requisite features. But all comparison sites are not the same!
Most comparison sites compare lender advertised rates, giving you the best of what the lenders claim to offer. However, HashChing, a FinTech startup sets to resolve exactly this problem. Powered by a network of verified mortgage brokers, the website compares rates pre-negotiated by brokers with lenders, letting customers choose from the lowest possible rates that banks would never offer to the customers directly.
Consumers can save up to $368 a month by reducing their average home loan rate of 4.79% p.a. to 3.59% p.a. that is currently on offer on a loan size of $550,000. Refinancing now to a lower rate can help you meet many other financial obligations – right from fixing a deposit for another investment property to taking that romantic vacation in Fiji with your partner. See the numbers magically reduce when you switch by using this easy repayment calculator. Read here to know more about refinancing your home loan.
This is where choice kicks in as well. When you visit a bank, the banker you meet represents a single lender, endorsing financial products offered only by one single lender. A mortgage broker, on the other hand, does not work for any one single lender. Brokers have access to financial products from many lenders, some more than others. As many of them are running independently, they have years of expertise and usually provide individual attention to each customer recommending the most suitable loans for an individual’s financial needs. Further, in slightly complicated cases of bad debts or low doc loans, mortgage brokers can significantly increase the chances of approval, having direct access to lenders to narrate an individual’s story; leading to higher customer satisfaction in return.
|Borrowing amount($)||Tern (in years)||LVR (in %)||Variable interest rate (in p.a.)||Comparison rate(in p.a.)||Application fee||Ongoing fee||Monthly repayment|
|Westpac||$600,000||30||80||4.53%(Max Package Discount)||4.91%||$0||$395 Annual fee||$3,084|
|CBA||$600,000||30||80||4.65%(Max Package Discount)||5.43%||$0||$395 Annual fee||$3,127|
|ANZ||$600,000||30||80||4.47%(Max Package Discount)||4.86%||$0||$3.95 Annual fee||$3,062|
|NAB||$600,000||30||80||4.6%(Max Package Discount)||4.90%||$0||$395 Annual fee||$3,109|
|Hashching Deal||$600,000||30||80||3.64%||3.99%||$0||$299 Annual fee||$2,766|
|Borrowing amount($)||Tern (in years)||Variable interest rate (in p.a.)||Comparison rate(in p.a.)||Application fee||Ongoing fee||Monthly repayment|
|Westpac||$600,000||30||80||4.8%(Max Package Discount)||5.17%||$0||$395 Annual fee||$3,181|
|CBA||$600,000||30||80||4.92%(Max Package Discount)||5.52%||$0||$395 Annual fee||$3,225|
|ANZ||$600,000||30||80||4.74%(Max Package Discount)||5.12%||$0||$395 Annual fee||$3,159|
|NAB||$600,000||30||80||4.7%(Max Package Discount)||5%||$0||$395 Annual fee||$3,145|
|Hashching Deal||$600,000||30||80||3.85%||3.88%||$330- refunded||$0||$2,813|
About HashChing: HashChing is a story of two friends, Atul and Mandeep, who realised by personal experience that the secret to unlocking lowest rates in the mortgage industry lies with mortgage brokers, who can pass on discounts and commissions to the borrowers. This is exactly what sets HashChing apart from other home loan comparison sites – HashChing is powered by a web of verified mortgage brokers across the country, thereby comparing broker negotiated rates instead of the much higher lender advertised rates.
Promoting a culture of on-demand and transparent service in the home loan industry, HashChing also helps consumers by letting them pose queries to verified brokers online, saving borrowers tons of money and time in the process.
How much do you want to borrow?