Mixed results for mortgage brokers

  • By Christian Edwards

A Deloitte survey for the Mortgage and Finance Association of Australia (MFAA) has revealed that while customer satisfaction is almost universal, one in every two clients do not understand how their broker makes money from their mortgage.

The largely online survey painted mortgage brokers in a pretty good light, with service, trust and relationship measurements all reporting favourably on brokers above other channels. However, with an ongoing regulatory tussle and in the wake of a parliamentary review into the conduct and incentive-based commissions of bank staff, the revelations are weighing on the mind of the MFAA.

“Are there people who do it properly? Not the whole industry, and that’s a concern. It is something we need to get better at,” said Stephen Hale, head of marketing and communications at the MFAA. “Satisfaction is high and growth for broker use and the referral industry is increasing. We’re obviously doing something right despite that… however it is concerning.” 

Continuing its dialogue with the regulator, the MFAA met with Michael Saadat, ASIC’s senior executive for consumer credit, in July to discuss the current inquiry and to present concerns from the broker community. 

According to the MFAA, ASIC confirmed the review will cover remuneration across “all parts of the value distribution chain” including consideration of vertical integration and “any impact these arrangements may have on the quality of consumer outcomes,” but did not touch on ways of enshrining an industry-wide mandate that ensures consumers are necessarily drilled on the financial reward involved in a mortgage transaction.

When asked if their broker explained how they were paid for their services, the Deloitte reserach found that, while 70 per cent of brokers provided some level of explanation, approximately 30 per cent were unclear and a total of 52 per cent of customers did not have the commission remuneration model completely explained. 


Valuable feedback

Hale told AB+F that while the results were troubling, steps were being taken to address it.

“It’s important that brokers explain that its part of the rules around being a broker,” he said. “It is of concern for us and we need to re-educate our brokers on it to make sure it is a requirement of their role and their interaction with the consumer. We don’t want that to continue, it is an area of concern, we won’t deny that.”

Lead researcher, Deloitte financial services partner James Hickey, said the results, while concerning, were “valuable feedback for the industry” and would further ensure “that transparency is absolutely there.” 

“This is hopefully part of an ongoing process where we can track how this metric and see how it improves over time,” said Hickey.

He added that the survey of more than 1000 home loans over the last 24 months presented a sector of largely satisfied consumers, with mortgage brokers delivering home loan satisfaction nine out of ten times.  However, Hickey added that a core take-away from the research – which focused on decisions around seeking a loan provider – was that overall satisfaction derived from engaging a mortgage broker.

“A key finding was that while overall satisfaction levels were high for both channels, with more than 90 per cent of borrowers satisfied with the service provided through either a mortgage broker or direct to a lender, mortgage broker customers were most satisfied.” 

According to Hickey, a contrast emerged where broker customers sought “a relationship and support” through the process and had their expectations exceeded when this was provided. 

“Some 32 per cent of mortgage broker customers rated their experience of using a broker at 9 or 10 out of 10, (where 10 ‘exceeded expectations’), compared with 20 per cent of lender customers giving a similar ranking," he said.

“Direct to lender customers, on the other hand, had largely made up their minds as to what they wanted. They tended to be seeking best price and product features from their lender, so it was harder to exceed their expectations."