Brokers are fuming over Jessica Irvine’s mortgage-brokers-as-washing-machine-salespeople comments in the Sunday Telegraph and some are biting back.
Darren Moffatt, owner and director of Seniors First, describes himself as a “big fan” of Irvine’s regular columns, but says she missed the boat completely in her article ‘Borrowers beware, you must shop around for the best value home loan,’ published on Sunday.
“Her attack on mortgage brokers might make for a nice headline,” Moffatt said, “but it’s riddled with factual inaccuracies and omissions. It’s not even a real story – everyone knows that brokers are paid commissions by the lenders and that is how it’s (mostly) kept as a free service.”
In the article, Irvine warns borrowers to treat mortgage brokers like appliance sales people, saying that the fact brokers are paid commissions makes them an unreliable source of balanced information.
“Mortgage brokers are paid entirely on commission they don't get paid unless they sign you up for a loan and those upfront commissions can vary from $2000 and $4000 depending on the lender. We'd like to believe most people are honest brokers, but when a broker can double their money by putting you on one loan over another, that creates a conflict of interest.”
This was something that Choice: The Peoples Watchdog’s Matt Levey agreed with, reminding readers in Irvine’s column that mortgage brokers are salespeople who shouldn’t be relied upon to offer unbiased or comprehensive financial advice.
Irvine goes on to claim that many brokers are failing to adequately disclose commissions they receive from lenders – something which, Moffatt says, is both illegal and unlikely.
“It ignores the reality of the government’s recent efforts to legislate against this concern, among others. In 2009, they introduced the NCCP act…If, as she claims, brokers are not disclosing, then the bigger story would be the failure of the government policy."
Moffatt ways it’s impossible for any authorised credit representative not to disclose exactly how much they’re getting paid, unless they’re deliberately trying to break the law.
MFAA CEO Phil Naylor agrees, saying the assertion that brokers don't act in the best interest of borrowers lacks any foundation.
"Transparency is a a key aspect of how mortgage brokers operate and it is unfair to assert that brokers are not providing unbiased and comprehensive infromation, when it is published material for the borrower in the loan documents they review and sign."
Naylor says all of MFAA's 11,000 members are upfront about the fact that they are paid by commission on the loans they provide, with strict government and industry rules in place to ensure they comply.
In her article, Irvine goes on to recommend the usage of sites like iSelect and Rate City to borrowers.
“From the comfort of your own home, you can check out the best deal and then approach a shortlist of lenders to apply for a loan. I know that's what I'll do when the time comes."
But Moffatt says it’s not that simple – these sites also receive income from banks and lenders for introductions to potential borrowers.
“Brokers are not just commission-earning machines,” says Moffatt, who calls Irvine’s washing machine analogy “insulting.”
“The comparison is erroneous…a mortgage is a much more complex product, with deep financial and emotional implications for the consumer. This is a comparison only an economist would love…In the fragile eco-system that is the Australian mortgage market, brokers play a vital role in keeping the flame of competition alive.”