If you’re wondering whether or not to use a mortgage broker when buying property, new research might just help you make up your mind.
An online survey has found that mortgage broker customers tend to be the most satisfied with their home loans, over people who go directly to a lender.
But the survey also found that commissions paid to brokers were still a prickly issue for many customers with some unwilling to pay for the service themselves.
The concern comes as the Australian Securities and Investments Commissions prepares to release a long-awaited report into broker commissions following concerns that advice by some broker companies may be skewed by incentives paid to brokers by some of the major banks.
Not all broker firms use such structures.
The survey was conducted by Deloitte on behalf of the Mortgage and Finance Association of Australia (MFAA).
Whilst we are typically skeptical of the independence of such research, the person leading the research notes that it was actually more difficult to exceed the expectations of people who went direct to a home lender themselves than it was a person using a broker service.
“Broker customers were largely after a relationship and support through the process,” says Deloitte financial services partner James Hickey, who added there was high satisfaction when this was provided.
“Direct to lender customers, on the other hand, had largely made up their minds as to what they wanted.
“They tended to be seeking best price and product features from their lender, so it was harder to exceed their expectations,” he said.
The survey also found that people who generally used a mortgage broker, would do so again with some 34 per cent saying they had an existing relationship with a broker and a further 32 per cent were personally recommended to the broker by family or friends.
The same can be said for those customers who chose to go direct to a lender as they were most influenced by their existing banking relationship with the lender at 58 per cent.
Who does cost compare?
There were more people who took out direct loans on the basis of price compared to those who used a broker.
Direct to lender borrowers ranked best price at 29 per cent as their next most important influence after their existing relationship, compared with 18 per cent for broker customers.
What about those commissions?
Commissions are the one area that most people question when it comes to using a broker and in most cases those are paid by the company supplying the loan, not the customer.
The survey found that most customers who used a broker were comfortable with the current method whereby the lender remunerates the broker by commission.
It was not clear from the survey to what extent broker commissions affected the decision of non-broker customers to go direct themselves.
In the survey 70 per cent of customers using brokers were aware how the broker was remunerated, but nearly half (30 per cent) were still unclear how that occurred.
When asked if they would pay the broker for their service, 63 per cent of broker customers would be prepared to consider it.
But 37 per cent of customers said they would go direct to the lender if they were asked to pay for broker services themselves or would still not want to pay anything explicitly to the broker for the service.