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According to Sydney broker Stephen Dinte, more than 80% of broker business goes to the major banks, however, with the current turnaround time differentials in play, he believes brokers should become better acquainted with second-tier lenders, or PALs, as the Independent Finance Brokers Forum (IFBF) calls them.
“We started a program a few months back called PAL, or Positive Alternate Lenders,” he told MPA. “This is the preferred way to reference those lenders who are currently referred to as ‘second tier’ lenders, because that has a connotation of them being ‘second rate’.”
In the program, BDMs from different non-majors present to an audience of brokers on the different niches they offer in the market. Dinte said he has seen many brokers have lightbulb moments when they hear just what each lender covers in terms of policy.
“The beauty of the alternate lenders is that most of the time their interest rates are equal to or better than that of the majors and their SLAs are fantastic,” he said. “From my experience in talking to brokers there is a perception in a lot of brokers that the major banks like us because we are giving them all this business, when in fact they don’t like us, we are a cost to them.
“I’m sure they’d rather have the business coming through their branches because the branches are costing them money anyway. There’s somewhat of a consensus that the service levels the major banks are providing is in fact a penalty to try and drive clients away from brokers and directly into the major banks because if you’re talking to a major bank, you can get your approval in two or three days compared to two or three weeks through a broker.
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“Brokers who believe that the banks like us are sadly deluded in that concept. That’s why we came up with PAL and that’s why we are saying to the brokers get out there and support all of these other lenders – because that’s the only way that the majors will start to realise that their monopoly is being eroded.”
Dinte said there were two main reasons why most broker-business goes through the majors. The first was because so many clients request to go though the Big Four due to their long-term ties as banking customers. Unfortunately, some brokers merely act as order-takers in this respect instead of suggesting comparable lenders with better service levels. The second stems from the banking background that many brokers come from.
“A lot of brokers used to work for one of the big four banks,” he said. “They are very familiar with policy in that bank and so they put a disproportionate number of the loans through that bank they used to work for.
“Brokers have got such a large number of lenders available to them compared to 20 years ago, they just need to learn what these lenders on their panel offer.”
This is crucial in an environment of best interests duty he said.
“That’s where the truly professional mortgage broker will educate their client, which is a requirement under best interests duty, and say to them ‘I know you’d been with this bank for 10-20 years, but there are all these other great lenders out there’.”
Kate McIntyre is an online writer for Mortgage Professional Australia. She has a wealth of experience as a storyteller and journalist for a range of leading media outlets, particularly in real estate, property investing and finance. She loves uncovering the heart behind every story and aims to inspire others through the artful simplicity of well-written words.
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