ASIC – Looking for a mortgage: Consumer experiences and expectations in getting a loan
Recently, ASIC (Australian Securities and Investments Commission) released “Looking for a mortgage: Consumer experiences and expectations in getting a home loan” – a report that examined the behaviours of 300 consumers in the process of securing a home local, and a survey of another 2,000 consumers.
Key findings of the report included:
- Consumers who visit a mortgage broker expect the “best” home loan option from them.
- Mortgage brokers were inconsistent in the ways they presented home loan options to consumers, sometimes offering little (if any) explanation of the options considered or reasons for their recommendations.
- First home buyers were more likely to take out their loan with a mortgage broker.
Below, Resolve’s Managing Director, Don Crellin explores these findings and key take-aways from this valuable report:
The ‘Best’ home loan
It is vitally important to recognise that the ‘best’ home loan isn’t always the cheapest.
There are many lending options with pros and cons to each, so it is fundamentality important to ensure you have a thorough understanding of a customer’s needs, goals and financial circumstances and what each loan offers.
There are a number of variables and scenarios where the features of a loan may be more advantageous in the long run than a cheaper upfront loan.
Always consider the specific needs of every customer and ensure they understand the recommended loan, is the ‘best ‘for them.
Presenting all options
The ASIC report revealed that many borrowers interviewed did not understand their broker’s recommendation.
This is a real concern; however, I do believe it presents an opportunity for our industry to do better.
With continued changes to credit policies by lenders, a broker’s recommendation of options is now more valuable than ever. Gone are the days where brokers would present just the best rate loan, now there are many variables for brokers to consider.
A good broker should be transparent and clearly show how they reached their recommendation. I believe it’s their role to educate the customer on their options and on how lenders distribute their home loans.
First home buyers and brokers
The ASIC report also identified that a large proportion of first home buyers turn to brokers for assistance.
Often, first home buyers are faced with higher hurdles by lenders including Loan to Valuation restrictions, Lenders Mortgage Insurance requirements, genuine savings requirements or other variations of credit policy.
In recent times, lender’s policies have also become more complex, especially for first home buyers.
Brokers are well versed in these challenges and policies and are well-placed to navigate new customers through the process.
I believe the findings of this report highlight the need for greater transparency and education across our industry. As an industry we need to better understand what our customers want and ensure the recommendations we make are clear and are the very best options for them.