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In an interesting turn of events, it would appear consumer advocate CHOICE has made a crafty move into mortgage broking.
Late last week, the self proclaimed ‘people’s watchdog’ launched a new campaign, commonly referred to as ‘One Big Switch’, that encourages home buyers to find a better deal on their mortgage.
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Those with a mortgage are asked to leave their details on a website being run by CHOICE.
One Big Switch said if more than 1,000 home buyers registered their interest they would be able to use the mass bargaining power to negotiate interest rate deals directly with lenders.
More than 10,000 people registered their interest within the first 24 hours.
Speaking to The Adviser, One Big Switch founder Lachlan Harris said the new campaign was designed to help everyday Australians seek a better deal on their mortgage.
“We want to talk to every lender and see if we can’t champion for better mortgage rates,” he said.
“We won’t just talk to the majors, but non-bank lenders as well.”
Mr Harris said the company, which holds its own Australian Credit Licence, was business that was looking to make a profit from any switching deal.
“We will receive commissions and we will pay CHOICE a referral fee for their part in the campaign,” Mr Harris said.
But while CHOICE said the referral fee would help “cover the costs of creating and delivering the campaign”, MFAA’s chief executive officer Phil Naylor said the commission paid to CHOICE would jeopardise the reputation of the company.
“CHOICE has always set its stall out on its independence, but now they are getting involved in the commercial market,” Mr Naylor said.
The move will no doubt also raise an eyebrow or two amongst brokers.
Not only are a significant number of brokers likely to lose their clients as a result of the mass switch, but it was only a few years ago that CHOICE was urging borrowers to avoid brokers altogether.
In October 2008 CHOICE concluded that borrowers could save between $18,000 and $46,000 over the life of their loans by not visiting a mortgage broker.
Regardless, CHOICE and One Big Switch are set to net a hefty brokerage fee.
A back of an envelope calculation based on a mortgage of $290,000 would indicate that 10,000 loans would generate an up-front fee of around $14,500,000 based on a commission of 0.5 per cent.
The trail income would also be a tidy sum.
