Borrowing money can sometimes be a nightmare, it’s often a complicated and lengthy process. But, having access to guidance, hand holding and lender choice can totally smooth the process. Borrowers who use the services of a Finance and Mortgage Broker instead of going direct to a lender find there is real value and importantly peace of mind.

The Mortgage and Finance Association of Australia recently commissioned Deloitte’s to undertake a survey of 1,000 customers to examine the experiences of borrowers whose home loans originate via either a mortgage broker or direct to a lender. I thought I would share some of the key findings of the report.

Broker customers tend to be more satisfied with their experience than direct to lender customers

While satisfaction levels are high for both channels, with over 90% of customers satisfied with the service provided through either brokers or direct to lender, broker customers were most satisfied. Some 32% of broker customers rated their experience of using a broker a 9 or 10 out of 10 (with 10 being ‘exceeding expectations’), compared to only 20% of direct to lender customers giving such a ranking.

Different customers choose different channels

For those using the broker channel, the decision was driven by personal relationships. An existing relationship with a broker was the most popular reason (34%) and the second most popular response was the recommendation of family/friends (32%). For direct to lender customers, the primary reason (58%) was driven by the existing banking relationship the customer had with the lender.

Customers using brokers value support, not just price

The next most important reason customers chose to go via a broker was for support through the mortgage process (19%), compared to only 7% for direct to lender customers. However, direct to lender customers ranked best price (29%) as the second most important reason behind existing relationship, compared to broker customers (18%). Through our qualitative focus groups, broker customers valued the ‘navigator’ role brokers played while direct to lender customers said they had performed their research and were largely focussed on best price by the time they went to the lender.

Brokers are rated as more likely to be acting ‘in the best interest’ of customers

While overall 82% of broker customers and 73% of direct to lender customers agreed that the broker or lender generally acted in their (i.e., the customer’s) best interest, the degree of confidence in this was higher for broker customers. Some 40% of broker customers felt the broker acted in their best interests at all times, compared to only 22% for direct to lender customers. Focus group feedback indicated direct to lender customers felt they may have been placed in products that were more complex and had more extras than in hindsight they needed.

Customers have high loyalty to their channel of choice

Consistent with the high satisfaction through each channel, customers expressed loyalty to remaining with their channel of choice. 73% of broker customers would use the same broker again for another mortgage and 65% of direct to lender customers would go directly to the same lender again. However, some 20% of direct to lender customers said they would go directly to a different lender next time, while only 12% of broker customers would use a different broker.

Online ‘end to end’ a future consideration, but most customers still value ‘face to face.’

When asked if they would consider doing the entire loan application process online in the future, some 30% said they would consider it. However, when asked if they would use the same channel again, some 95% said they would use either a broker or go direct to the lender with less than 5% saying they would instead do it directly online. This highlights the gap between customers saying they may ‘consider’ online compared to less than 5% saying they actually would use it. The focus groups reflected this, with both broker and direct to lender customers less positive about using online only for the home loan process and instead saying they valued the ability to have a personal relationship and contact with the broker or lender representative.

Paying for the service

While the majority (70%) of customers using the broker channel had it explained to them by the broker how they were remunerated, some 30% were unclear on how the broker was paid. When asked if they would pay for the service provided by the broker 63% would be willing to pay a dollar amount with 22% willing to pay up to $500, 18% willing to pay between $500-$1,000 and 23% willing to pay more than $1,000. However, 37% of broker customers would either not use a broker or not want to pay anything, and would instead go direct to the lender if asked to pay. In the focus groups, customers strongly agreed that the broker should be remunerated for the value they are providing and were comfortable with the current method whereby the lender remunerates the broker by commission.

What is your lending experience and would you choose to place your loan directly with a bank or use the services of a mortgage broker?

I would love to hear your thoughts on the matter.

If you are considering a career in the mortgage and finance industry or would like to discuss any loans you require, please give me a call on M: 0417 738 469.

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Mortgage News Borrowers Choice – Broker or Direct?