You don’t need to pay for your broker’s trip
Commissions and incentives, including holidays, cruises and trips to the Playboy mansion, paid by lenders and mortgage aggregators to mortgage brokers are under investigation by the Australian Securities and Investment Commission. ASIC will report to Financial Services Minister Kelly O’Dwyer by the end of 2016. Consumer advocates say the lucrative volume-based incentive system for paying mortgage brokers can lead to inappropriate advice to borrowers who trying to find the best loan for their particular situation.
Why are mortgage broker commissions under investigation?
Some mortgage brokers work to sales targets for selling loans. No mortgage broker compares loans from all the major and minor reputable mortgage lenders in Australia. While a broker may claim to be finding the best loan available, they may not be incentivised to recommend all loans equally. Larger loans usually attract a higher commission. Sales targets may trigger extravagant bonuses, including holidays, cruises and even a trip to the Playboy Mansion in Beverley Hills, California in one case reported by The New Daily.
Brokers also receive ongoing trail commissions every year the loan is being repaid. The trail commission paid by lenders can be as much as $600 per year on a $300,000 home loan. Broker trail commissions provide an incentive to sell interest-only loans, large loans and loans from lenders who pay higher commissions.
Regulators want to rein in interest-only home loans for owner-occupiers because borrowers could struggle to meet repayments when the interest-only period expires. Deakin University tax specialist Dr Adrian Raftery said the growth of interest-only loans is chiefly due to the influence of broker trail commissions.
How to use a comparison site to find a home loan
Infochoice is a financial product and service comparison site listing loans and accounts from all the major and minor banks in Australia, all the significant credit unions plus non-bank lenders. The Infochoice panel of lenders is the most complete listing of home loans in Australia. The Infochcoice comparison service is one of the oldest and most trusted financial product comparison service in Australia. Sponsored listings are clearly marked and all significant lenders can be compared.
First, work out what you can afford to repay with a household budget. Use the Infochoice Home Loan Calculator.
If you are refinancing an existing home loan, use the Infochoice Refinance Calculator to estimate how much you can save by switching loans.
You can compare the costs of two loans of your choice by using the Infochoice Home Loan Comparison Calculator
With infochoice at your fingertips, you can take control and get the best loan deal available. The best part is – it’s all free.