Finance

Myth #1: Going direct to a bank gets you a better rate

It’s time to dispel the commonly held belief that brokers are more expensive than banks.

Borrowers are mad about interest rates. Particularly at the moment when they are so low. Often, after discovering their neighbours are paying a lower rate on their home loan, clients will inquire about why they’re paying more. A valid question. 

First off, mortgage brokers don’t set interest rates. That’s a lender’s job. The rate you get at the bank is the rate that you get. If you want a different interest rate, you will need to visit a different bank. But there is really no need to physically visit another bank because mortgage brokers do that for you. Also, it doesn’t cost you anything. Mortgage broking is a free service for the customer. It’s the bank who pays.

Don’t believe the hype

About 40 per cent of Australian home owners have never used a mortgage broker. According to the 2020 Consumer Access to Mortgages Report from Momentum Intelligence, a large contingent of consumers, particularly proprietary channel customers, believe they will be charged a higher interest rate by securing a mortgage via a mortgage broker, which may be influencing their decision in the channel they will use in the future.

The primary reason consumers continue going direct to the bank, rather than using a broker, is because they believe they will get a better rate. There is absolutely no evidence of this being the case. A bank will provide the same rate via a branch or a broker. How a customer chooses to engage with the lender has no bearing on the price of the loan. 

Let the broker shop around for you 

With price being a critical factor for most borrowers, it is worth considering how to obtain the most competitive rates available. The only way to do this is to consider all the different finance options currently available in the market for your particular circumstances. This can be a complex and time-consuming process. It’s also what mortgage brokers are experts at. 

What brokers provide is a variety of finance solutions from different lenders. We also have your best interest at heart and, unlike lenders, are bound by a Best Interest Duty (BID). 

So, the next time you want to refinance your existing loan or apply for a new one, talk to a broker about what they can do for you. 

It may just end up being the cheaper option.  

Author

Adam Stephenson

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