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Thinking about using a mortgage broker? Here’s one thing you should always ask
By John Collett
Home buyers are turning to mortgage brokers to negotiate their home loans at record rates, but they risk being given a bad deal if they do not ensure their broker is up-to-date with mortgage and housing markets.
Mortgage brokers are signing up more than 70 per cent of new residential home loans – the highest percentage ever. However, simultaneously, many brokers are taking on work only as a side hustle.
Figures from the Mortgage and Finance Association of Australia show that 22 per cent of the mortgage industry’s 19,000 brokers did not write a single loan between October 2022 and March 2023.
One of the most important questions anyone thinking of engaging a mortgage broker can ask is about their experience.Credit: Wolter Peeters
These brokers have not written a loan for months and have likely fallen behind on what is happening in the mortgage market.
Rob Lees, the principal of Mortgage Choice, Blaxland and Penrith, says one of the most important questions anyone thinking of engaging a mortgage broker can ask is whether mortgage broking is their main occupation and how much experience they have.
It is not only financial planners and accountants who could be part-time brokers but also those working any occupation, including those completely unrelated to financial services.
Brokers, including part-timers, will be part of an aggregator network, operating under the aggregator’s credit licence rather than working purely on their own.
The way mortgage brokers are paid is that the lender pays the broker a fee or commission if the mortgage successfully completes – though some brokers will also charge a fee to the client.
While some brokers get paid a standard fee, regardless of what lender they recommend, others receive a higher fee for offering mortgages from particular lenders.
The minimum qualification to be a mortgage broker is a Certificate IV in Finance and Mortgage Broking. Mortgage brokers are subject to a “best-interests duty”, where consumers’ interests must be prioritised over their own.
Brokers who are members of the Mortgage and Finance Association of Australia are required to complete a Diploma of Mortgage and Finance Broking Management within 12 months of joining.
Peter White, the managing director of the Finance Brokers Association of Australasia (FBAA), another association for brokers, says most of those working part-time will include parents looking after children, and that does not “take away from their knowledge or skills”.
While educational qualifications beyond the minimum are not required for membership of the FBAA, many have higher qualifications, and most members are aged between 45 and 55 and have been in the industry for at least 10 years, White says.
A broker should be able to communicate well and clearly state the reasons for recommending mortgages, together with the features of the mortgages and how they work. Lees says the recommendations should be in writing, pointing out why they are in your best interest.
The Australian Securities and Investments Commission’s MoneySmart website has some useful tips for finding a broker. It says a broker should present you with more than one option. You do not have to take any of the recommended mortgages and can ask the broker to find alternatives.
Never sign blank forms or leave details for the broker to fill in later, MoneySmart says.
- Advice given in this article is general in nature and is not intended to influence readers’ decisions about investing or financial products. They should always seek their own professional advice that takes into account their own personal circumstances before making any financial decisions.
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