Rental? Not so good…
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Cashback offers and low fixed rates – they seem like the perfect marriage for borrowers. But, while consumers are excited by the choices on offer, extended turnaround times are leaving brokers caught in the middle. According to Top 100 broker and CEO of Loans Australia Stephen McClatchie, brokers are being put in a difficult position because of this – especially when the client has already committed to a property purchase.
“Brokers are on the frontline, so clients get upset with the broker even when you position the client to let them know what’s going to happen and give them choices around that,” he told MPA. “Under BID especially now, it’s got to be extremely transparent. We’ve got to tell them how long it’s going to take if they want a particular bank because they’re offering a cashback and maybe they’re putting a ‘1’ in front of their loan.
“That has created large issues because people miss finance clauses – and also there’s clients out there that buy without a preapproval which makes it very, very difficult.”
McClatchie said once a broker explains that the bank the client is most interested in won’t be able to assess their application within the timeframe required for settlement, the client will often go with a lender that will, only to come back six months later wanting to refinance to the first bank. This is a scenario that ends in the broker’s upfront commission getting clawed back.
Read more: Does more cashback mean more clawback?
“They are back to you in six months wanting to refinance to the loan they wanted which creates more work which is not paid for anymore,” he said. “This makes it very difficult for brokers all around. Brokers could be doing the job twice because the banks haven’t got their act together.”
The lender SLA blowout is an issue that is not new, he said. Often over the course of his 25-year career, multiple lenders have brought out special offers that bring a surge of demand without “staffing up” beforehand.
“I don’t think that is in the best interests of clients,” he said. “If you are offering something and it takes 30 days to assess, I can’t see how that’s in anyone’s best interests.”
Read more: Lender SLAs – are they impacting the best interests of clients?
Primarily helping investors with finance, McClatchie said his focus has always been on educating clients that interest rates are not the most important factor in their investment journey. Because of this, his clients come to him for his service, rather than to seek out the lowest fixed rates. McClatchie said there are some great fixed rate offerings in the market for investors that come with greater flexibility than what is served up by the big four.
“Some of the smaller, more manoeuvrable banks have got much better features on their fixed rates than some of the larger banks,” he said. “Some of them you can have construction loans on fixed rates, you can have multiple offset accounts, you can have redraw facilities, you can make unlimited extra repayments on your loan even when it’s fixed.
“Most brokers tend to favour the big four, so most consumers aren’t aware of these sort of products. Hopefully things like BID will improve that part of it because brokers are going to have to provide a wider offering to clients.”
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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