Brokers must ditch trail of sweet treats

A BAG of jelly beans inside a birthday card and some newsletters in the mail.

That’s what I get from my mortgage broker each year after signing up to two home loans in the past six years.

Is that what my trailing commissions are paying for?

Mortgage brokers have been thrown into the spotlight at the latest round of the financial services royal commission, and commissioner Kenneth Hayne certainly is shining his torch brightly on them.

Don’t be surprised to see a major overhaul of the broking industry coming our way very soon.

Most mortgage brokers get paid an upfront commission when you sign on the dotted line of a home loan contract.

A broking source explained to me on a $300,000 30-year home loan, brokers often get an upfront commission equating to about $1950.

Then from here they could get another $1290 in trailing commissions over the next four years – the average length a loan lasts – so about $3240 in total.

But to be clear here, customers don’t whip out their credit card to pay for this, the commissions are paid by the lender and not the borrower.

I’m not here to bag brokers. They have their place. My broker helped me pick a good lender that I’ve been happy with since I signed up.

When I bought a second property, he helped me juggle an owner occupier loan as well as an investor loan to make sure it would work for me.

But what they do once they’ve got you signed up leaves me questioning what these trailing commissions are actually for.

On numerous occasions I’ve rung up my lender directly and got them to drop my interest rate on the spot. I didn’t need a broker for this.

And when my broker tried for me in the past, it failed.

I had more luck ringing up myself.

For a broker to be worth his weight in gold, it requires saving a customer money.

I ring my bank at least three or four times a year and demand a better rate.

More often than not I get an instant rate cut.

I don’t need jelly beans or birthday cards. I’d rather my broker did the hard yards and helped score me a better deal.

It was only last week I received a call out of the blue from my broker keen to have a quick catch up.

This, to me, is a sign of the times – brokers need business.

The royal commission certainly isn’t helping them at the moment.

In fact, it has tarnished their reputation.

And there’s no secret that in many capital cities, including Sydney and Melbourne, the property market is dramatically slowing down.

Loans are harder to get, prices are falling and we face some drastic changes to negative gearing rules if Labor leader Bill Shorten becomes our next Prime Minister, which looks almost certain.

Forgot the jelly beans and focus on the service.

Customers want savings, not to be left on a sugar high.