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Mortgage brokers are raising concerns over a recommendation from the Commerce Commission that could make borrowing more complicated. The commission’s final report on the banking sector suggests mortgage advisers should present buyers with at least three offers from different lenders to promote price competition. Advisers would also need to disclose any banks they couldn’t work with and the interest rates available from those institutions.
Currently, about two-thirds of new home loans are secured through mortgage advisers, a significant increase from just under 30% in 2014.
David Cunningham, CEO of Squirrel, called the recommendation for three offers a “solution in search of a problem.” He explained that advisers already interact with multiple lenders daily, continuously reviewing credit policies and rates to guide their recommendations. Forcing advisers to gather three offers could slow the loan approval process significantly, as each bank would need to undergo a full credit assessment, even though they might only win the deal a third of the time.
“Currently, it can take one to two weeks to get loan approval, and this process could stretch even longer under the proposed changes, bogging down the entire system without boosting competition,” Cunningham said.
Loan Market adviser Karen Tatterson agreed, stating that a thorough initial consultation typically allows advisers to recommend the best bank for a client. She pointed out that interest rates across banks are often very similar, and the focus is on finding the right loan product rather than just the rate. Tatterson added that requiring three offers would create delays and reduce service quality, as advisers would spend more time fulfilling bureaucratic requirements rather than focusing on tailored advice.
“The suggestion undermines the advisory role of brokers and turns them into mere order takers,” she said.
Massey University banking expert Claire Matthews also criticized the proposal, saying it would create unnecessary work for banks without adding value. She warned that lenders might become reluctant to work with advisers if they knew their offer was likely to be one of the “other two” required for compliance, rather than a genuine opportunity.
SOURCE: RNZ