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EXCLUSIVE A quarter of Australian borrowers say they were given one lender option by their broker, despite nine in 10 brokers claiming otherwise.
The 2021 Consumer Access to Mortgages Report, released in partnership with The Adviser by Momentum Intelligence, surveyed over 450 consumers between January and April 2021.
It asked consumers how many different lender options they were offered by their mortgage broker. The results showed that 25 per cent of borrowers believe they were only provided a single option to consider.
However, these results are markedly different when the question was asked of brokers. In a recent Broker Pulse survey, Momentum Intelligence asked brokers how many options they provide their prospective borrowers. The results indicated that 93 per cent of brokers provide their clients with three or more options. Only 3 per cent admitted they provide a single option.
“The process of evaluating and recommending lenders to clients is a core skill of mortgage brokers,” the Consumer Access to Mortgages report noted.
“Their ability to be able to align the prospective borrower’s circumstances with the lender products is key to the broker’s intellectual property.”
The report noted that the mismatch between borrower perceptions and broker processes indicated that there may be potential issues with how brokers are providing these options to their prospective borrowers, which may be limiting the consumer’s understanding of what options are available to them.
“However, it appears this has been improving as for the consumers who took out a loan outside the last 12 months, they had an average of 2.60 lenders offered while those inside the last 12 months had an average 2.81 lenders,” the report said.
This pattern was also identified when we asked consumers whether their broker explained the process of how they chose the lenders.
Overall, 79 per cent borrowers were given explanation about the process, however one in five answered either “no” (18 per cent) or “unsure” (3 per cent).
It is also possible that consumers are unaware of the nuanced differences between options presented by a broker and a recommendation.
ASIC’s Regulatory Guide 273 (RG273) on best interests duty (BID) in mortgage broking states that “it would generally be helpful to present the consumer with a shortlist of options with one option being the recommended option. For example, the recommended option may be a suggestion that the consumer take out a particular product.”
RG 273 goes on to state that the size of the short list may vary according to the consumer’s circumstances.
“Additionally, in some specific cases, it may be necessary for you to make more than one recommendation to the consumer. This could occur if you determine that two products are largely similar and would equally meet the consumer’s best interests, and you decide that it is in the consumer’s best interests to, after providing the shortlist of other options to the consumer, recommend both of those products,” it said.
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