Deloitte published their Australian Mortgage Report 2017 last week (April 2017) and 60% of the industry leaders surveyed said mortgage brokers were the most influential information sources for consumers on mortgages. The internet as well as ‘friends and family’ also got a mention… but interestingly no one said traditional banks were the most influential source anymore.
The banks are accountable to shareholders and obviously need to lend money to make money, however with the regulatory pressure being applied from ASIC and APRA it’s as if they’re doing business with one hand tied behind their backs at the moment.
In response to new data showing that over the last year interest only loans accounted for 40% of all mortgage settlements, APRA further intervened on 31 March 2017 by imposing a second speed limit of 30% p.a. on the growth of interest only lending. This is a new requirement the banks must adhere to in addition to the 10% p.a. cap already imposed in December 2014 to control the growth of loans to investors.
Over the past four weeks many banks have announced out-of-cycle rate increases, and they are tightening credit policies and in certain cases turning away business now in order to abide by the new rules. There are even examples of banks holding back and delaying settlements on approved applications simply so as to not exceed their monthly quotas.
As this continues I think the importance of mortgage brokers will continue to grow. I’ve written extensively about this previously, see here for my article on the growth of the mortgage broking industry and how you can find good operators to work with.
Borrowers need guidance as to who the most suitable institutions are that can best support their individual requirements and circumstances. It’s all too difficult and time consuming otherwise, particularly with interest rates and credit policies amongst all lenders changing so rapidly now.
And by limiting your research to your current bank only, not only do you risk damaging your credit profile (e.g. by applying for a loan which then gets declined), you also risk walking away with a worse deal. Choice is good for consumers, particularly when it comes at no extra cost. (brokers get paid by the banks, so our services are free to consumers, and you can’t get cheaper rates by going to any bank directly, in fact often the opposite occurs)
In what’s becoming an increasingly complex lending environment, I’m with those who believe providers of information, rather than just product providers, will ultimately win out.
