July 11, 2011
Heated debate is escalating in the mortgage broking industry around the potential for customers to pay a fee for service. We have heard differing opinions on what the future will hold, but what do Australian potential property buyers think?
The country's largest independently-owned mortgage broker has gone straight to the source over the last couple of weeks, to look at the issue from the public's perspective.
61% of the 1,050 Mortgage Choice 2011 Fee For Service Survey* respondents said they would not pay a fee for using the services of a mortgage broker.
24% would not even consider paying a fee that was fully refundable upon the purchase settlement.
Mortgage Choice CEO Michael Russell said, "With most brokers currently not charging customers a fee for service, the debate is raising a lot of questions around what the industry's next move could and should be and how lenders will react if fee for service came into play."
"It is no surprise the survey respondents leaned very heavily towards not paying upfront for assistance that is currently free. Although more were willing to pay a refundable fee, the findings still left almost one in four refusing to even contemplate reaching into their wallet.
"Brokers need to carefully think through whether our individual businesses and the industry as a whole are in a strong enough position to forego at least one quarter of new business. Will consumers who are insufficiently educated as to a broker's value simply divert their enquiry direct to lenders? Can service fees recoup such a significant loss of volume? How will lenders respond?
"As suspected, our 2011 Fee For Service Survey validated that unfortunately the industry is not yet sufficiently mature to introduce fees without penalising ourselves considerably.
"Based on this, other consumer research, conversations with our brokers and the condition of today's housing finance market, Mortgage Choice is postponing any action on the fee for service front until at least the next financial year.
"We are taking into serious consideration our findings and will not move towards charging any fee if it puts at risk the business of 24% of potential customers.
"Mortgage Choice's present focus is on campaigning for improved consumer awareness of the value proposition presented by a professional mortgage broker."
Other key results:
- Of the 39% of respondents who said they would pay a fee for service, 50% would pay between $1 and $250, 32% would pay between $251 and $500, 8% would pay between $501 and $750 and the remaining 10% would pay more than $750.
- Of the 76% who would contemplate paying a fee that was fully refundable upon the property purchase settlement, 35% would pay between $1 and $250, 36% would pay between $251 and $500, 11% would pay between $501 and $750 and 18% would pay more than $750.
* The Mortgage Choice 2011 Fee For Service Survey was commissioned to Ticketek Insights and ran online over 27 May to 6June 2011. The 1,050 respondents were from all age groups and states/territories and all said they were potential homebuyers.