Bottom line of the Royal Commission’s recommendations can be summarised by the share price movements in yesterday’s market, with bank shares surging ahead 5%. Westpac’s share price soured to the biggest one-day-gain in a decade! These immediate movements indicate how lightly the banks got off considering their misconducts that came to light during the commission’s inquiries.

Over the last 20+ years Australians have shown their support of mortgage brokers as they provide choice, trust and most importantly allow for competition in the market place.  With a dominant market share of now 59%, it’s clear who the public trust and choose to do their mortgages.

 

Mortgage Brokers Remuneration

Within the past 2 years various regulatory bodies have reviewed broker commission models and the outcome was consistently; the current model is acceptable and works. This includes reviews undertaken by the Productivity Commission, ASIC and APRA.

Each of these independent reports concluded that broker’s total remuneration is fair. Additionally and most importantly they recognised brokers bring competition to the home loan market. Reducing broker remuneration will reduce broker numbers and therefore create a smaller platform for all the medium sized and smaller lenders who don’t have the branch infrastructure of the big banks to compete – hence the surge in major bank shares price yesterday.

 

Research complete by the Royal Commission into Brokers

It has to be asked, where was the intense research done into the Mortgage Broking industry by The Commission? The Commission’s insight and research into the mortgage broking industry was conducted via questions to Aussie Home Loans (100% owned by CBA) and questions posed to Matt Comyn (CEO CBA).

This is comparable to the government setting up a task force to assess the long- term health risk of e-cigarettes with all inquiries being directed exclusively to various CEO’s of tobacco companies…no guess whose interests would be at heart!

 

What this change means

The changes proposed to the broking industry will reduce the number of mortgage brokers that can afford to continue in business.  This will result in reduced competition from smaller lenders.  Reduced competition directly favours the Big4 Banks that will fight tooth and nail to protect their branch distribution channel.

The Big4 Banks would love to go back to a time where the only place you could source a home loan is via one of their branches; a time where they could set their interest rate margins to whatever they wanted as there was no competition from smaller lenders to force downward pressure on interest rates. I can’t understand how this can be seen to be a positive outcome for borrowers.

 

Way Forward for Professional Partners

Every day the sun rises, and people still buy homes, investment properties and need finance for various reasons. We’re here to serve you, guide you and provide top class advice. That’s what mortgage brokers do!

If you or your friends want your loan reviewed or advice about buying home or investment property or loan structuring or competitiveness please contact us as its business as usual!

There is no greater financial commitment than your home and its loan. That’s why it makes perfect sense to regularly check your home loan health and ensure it’s still working for your particular situation.

Here are five key reasons why you should consider refinancing your loan, not least of which the fact that it could save you thousands of dollars!

1. You could score a lower interest rate

This is undoubtedly the most enticing reason to consider refinancing. After all, less interest means more money in your pocket and not the banks. That’s an outcome we’d all love, right?

With rates slowly starting to rise, now is the perfect time to see if you can lock in a better deal and save.

2. You could take advantage of a switch between a variable & fixed rate

Another very popular reason to refinance is to switch between a variable and fixed rate. A fixed rate may give you peace of mind as you’ll know exactly how much your monthly repayments will be, without the possibility of it changing.

Or perhaps you’re in the opposite boat – on a fixed rate that is higher than the variable. Switching from one to the other may bring you some considerable savings.

3. You might be eligible for a home loan with better features

Home loans change as much as you change your underwear – well, almost! It’s highly likely there are now a range of new features available that weren’t when you set up your home loan. They could save you some serious cash.

For instance:

• Lump sum repayment without fees
• Offset account to reduce your interest
• Repayment holiday (a break from repayments)
• Loan portability (take your home loan with you when you move without completely refinancing)

4. You could consolidate your debt

Many of us have liabilities in addition to our home loan. It might be a car loan or credit card debt, and these loans often come with high interest rates. Refinancing might give you the opportunity to merge your loan debts via ‘debt consolidation’. You could potentially reduce the overall interest you’re paying and even reduce your monthly repayments.

5. You could release equity in your current property

You might be at the stage where you want to buy an investment property, or perhaps renovate your current home. Maybe it’s time for a trip around Australia or overseas. You can do all of these things by drawing on your most valuable asset – your home.

In years gone by, you could only access the equity in your home by selling and then buying another property. However, things have changed significantly.

Loans today are much more flexible so you can release the equity in your home without having to sell. Reviewing your home loan will show you exactly how much equity is available to you, and refinancing can help you access it for other things.

Not sure you’re ready to refinance?

Refinancing has some amazing benefits but as with most things in life, it can be a little tricky and does have associated costs. In some instances, the costs may outweigh the potential benefits. This is precisely where a good mortgage broker comes in. They can help you weigh the pros against the cons to see if refinancing is right solution for your situation.

If you’d like some further help with your refinancing needs, please get in touch. We’d be happy to spend some time with you to present a host of options to suit your needs, hopefully saving you some cash in the process.