Oct 20

The emergence of the mortgage broker in the Australian mortgage industry?

Published in mortgage brokerhome loan financehome financecheap home loan by Vicky Edema
During the 1990s there was huge growth in the number of mortgage brokers providing services to borrowers looking to purchase, refinance or endeavouring debt consolidation. This came about because of a number of factors prior to this time

1. the choice of mortgages available to borrowers was pretty limited. You didn’t really need a mortgage broker if the decision was simply whether to take an interest only investment loan or a principal and interest home loan. The features within mortgages were limited – redraw for example was unheard of on the 1980s, splitting a loan into both fixed interest and variable rate interest was also generally unavailable – so there was little need for a mortgage broker to explain the terms and conditions of your proposed home loan.

2. why would you need a mortgage broker when the interest rates applicable on standard loans was very much the same no matter which lending institution you decided to go with?

3. banks dominated the market with extensive branch networks. As a general rule they did not look to market their product through a mortgage broker – a customer came to them direct if they wanted a loan.

In the early 1990s however, things began to change. New mortgage lenders entered the market and offered a wide range of multi-featured loan products at exceptionally good interest rates. Borrowers soon realised the value of utislising the services of a good mortgage broker. What could the mortgage broker offer you?

1. knowledge and expertise – a mortgage broker is familiar with the features and interest rates offered by a range of lenders. A mortgage broker accesses interest rates from many lenders on a daily basis and knows when special deals are on offer. A mortgage broker also can assist you with putting your application together to ensure that you include all your details and have the best chance of a positive response from the lender.

3. saves you time and money – by finding you the most competitive rates quickly a mortgage broker saves you considerable time in identifying the right lender for your needs as well as being one that has excellent interest rates when compared to many other lenders in the market. A mortgage broker will often be happy to visit you at home to run through a mortgage application – there is no need for you to go through a harrowing appointment with your bank branch manager ( if he still exists) or other lending institution.

3. a mortgage broker did not charge for his services because he received a commission and sometimes a trail income for business that he introduced and which settled with a bank or non-bank lender. Your interest rate and costs were the same if you dealt with a mortgage broker or went direct to the lending institution.

The emergence of the mortgage manager and the mortgage broker brought about increased competition with the banks and as a result the banks after some time were forced to recognise that the non-bank sector “were here to stay”. As a result the banks dropped their margins on loans which resulted in huge savings for borrowers across Australia. Despite this the non-bank retained a price advantage and the good mortgage broker was able to thrive in a competitive mortgage environment. During the 1990s there was huge growth in the number of mortgage brokers providing services to borrowers looking to purchase, refinance or endeavouring debt consolidation. This came about because of a number of factors prior to this time

1. the choice of mortgages available to borrowers was pretty limited. You didn’t really need a mortgage broker if the decision was simply whether to take an interest only investment loan or a principal and interest home loan. The features within mortgages were limited – redraw for example was unheard of on the 1980s, splitting a loan into both fixed interest and variable rate interest was also generally unavailable – so there was little need for a mortgage broker to explain the terms and conditions of your proposed home loan.

2. why would you need a mortgage broker when the interest rates applicable on standard loans was very much the same no matter which lending institution you decided to go with?

3. banks dominated the market with extensive branch networks. As a general rule they did not look to market their product through a mortgage broker – a customer came to them direct if they wanted a loan.

In the early 1990s however, things began to change. New mortgage lenders entered the market and offered a wide range of multi-featured loan products at exceptionally good interest rates. Borrowers soon realised the value of utislising the services of a good mortgage broker. What could the mortgage broker offer you?

1. knowledge and expertise – a mortgage broker is familiar with the features and interest rates offered by a range of lenders. A mortgage broker accesses interest rates from many lenders on a daily basis and knows when special deals are on offer. A mortgage broker also can assist you with putting your application together to ensure that you include all your details and have the best chance of a positive response from the lender.

3. saves you time and money – by finding you the most competitive rates quickly a mortgage broker saves you considerable time in identifying the right lender for your needs as well as being one that has excellent interest rates when compared to many other lenders in the market. A mortgage broker will often be happy to visit you at home to run through a mortgage application – there is no need for you to go through a harrowing appointment with your bank branch manager ( if he still exists) or other lending institution.

3. a mortgage broker did not charge for his services because he received a commission and sometimes a trail income for business that he introduced and which settled with a bank or non-bank lender. Your interest rate and costs were the same if you dealt with a mortgage broker or went direct to the lending institution.

The emergence of the mortgage manager and the mortgage broker brought about increased competition with the banks and as a result the banks after some time were forced to recognise that the non-bank sector “were here to stay”. As a result the banks dropped their margins on loans which resulted in huge savings for borrowers across Australia. Despite this the non-bank retained a price advantage and the good mortgage broker was able to thrive in a competitive mortgage environment.
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