Exit fees on mortgages removed

[Bigtone]

What rubbish............Anyone such as yourself are self interest people.............nothing more....

The consumer has been scammed for long enough in all areas of loans, money lending, credit cards and brokers who skim the cream to boot..

Hopefully this will be a new era for consumers over the next 20 years as these laws come into play....

Early days yet and its most welcome!

Why didnt this happen when the Libs were in power for 10 plus years????

Now they are crying foul about the ideas being implemented...

Bugger the banks and the brokers............about time this industry had a level playing field.....still a long way off however but at least this is a start....

Really pathetic stuff to think that this is not a step in the right direction...

the problem is it does not create a level playing field it does the opposite, it suits the big 4 down to the ground, why do u think they have been so quick to drop the fees already, it gives them a massive competitive advantage

some would say "pathetic" is to be so naive yet so opinionated

 

[csc2]

Considering you have asked questions here of brokers for free, do you think this comment is unfair? I have been in this industry for 8 years and can tell you that i have not met many brokers that do it for the money cause most of them dont really make a lot for the effort they put in.

never have i asked a question to a broker that involved me requiring finance...so please post facts not run off at the mouth when it pleases you.

trailing commissions are the lifeblood of brokers..........if they were earning 25k a year then complain....but they are not are they!

 

[Rob G.]

Why didnt this happen when the Libs were in power for 10 plus years????

Might be because they could see the obvious unintended consequences.

Can you lobby now for elimination of cheap rate phone and internet access plans. They lock people into plans in order to deliver cheaper services.

While you are at it, ban lease contracts and put everybody on casual tenancy and see what that does to rent prices.

Lock-in is about certainty.

Uncertainty = risk

Risk = price premium

The beauty of this plan is freedom of choice ... free from having to make a choice. All products will be the same, and from the same cartel.

The Labor government actually diminished banking competition by allowing recent bank mergers.

Cheers,

Rob

 

[Rolf Latham]

Hi CSC2

im only going to pipe up here to bring in some external views

Have a bo peep to see what Access Economics have to say about this idea.

I will paraphrase

If one takes a step back and has a look to see how the industry actually works, that one little idea of legislating removal of defs will reduce competition.

"Bank based" Lenders generally have more than one product with a client, thus they are relatively sticky, and therefore the lender can pass the "increased cost" ( reduced margin) to its clients in various different ways.

The little non bank guys cant do that and will likley be pushed out becaus they will have to charge higher rates, thus making them non-competitve with the bank based lenders.

Again as some external feedback

http://www.rba.gov.au/speeches/2010/sp-gov-131210.html

ta
rolf

 

[jonmardell]

never have i asked a question to a broker that involved me requiring finance...so please post facts not run off at the mouth when it pleases you.

trailing commissions are the lifeblood of brokers..........if they were earning 25k a year then complain....but they are not are they!

what about this one ? http://www.somersoft.com/forums/showthread.php?t=66702

I really dont think it is fair to make a blanket remark with regards to all brokers!

 

[Spectre]

Another kick in the teeth for the broker network. Brokers now stand the risk of increased clawbacks and, should this happen, most likely will need to charge for thier services. I fail to see how the consumer wins out of this.

The governments move seems to be a kneejerk reaction to dumbass current affairs programmes and their one sided bank bashing.

I just have a different business model and in mine, we pass clawbacks back to the borrower. IMO all brokers should be operating with these in their standard agreements, and really you cant be operating a business which is running unprofitably. Same time I've got no issue with charging someone upfront before we even start work on a deal.

 

[bluestorm]

Early days yet and its most welcome!

Why didnt this happen when the Libs were in power for 10 plus years????

Now they are crying foul about the ideas being implemented...

Bugger the banks and the brokers............about time this industry had a level playing field.....still a long way off however but at least this is a start....

csc2, you do realise that this is what the banks wanted, don't you? This will greatly benefit the big 4 banks at the expense of the smaller lenders.

Not only the exit fee reforms, but also the lifting of the ban to issue Covered bonds, which the banks have been lobbying the government for, for a long time.

But like in my original post to the thread.
Labor wins, banks win. The silly Labor lemmings loose again (and thank Labor).

 

[VIC Lender]

What rubbish............Anyone such as yourself are self interest people.............nothing more....

... to think that this is not a step in the right direction...

If you read between the lines; the government is forcing the small dodgy non bank lenders out of the market whilst trying to elevate the more credible Credit Unions to a level where they can compete with the Banks.

This will result in less lenders in total. But a better range of tier 1 lenders in the market. Not a bad thing.

Many credit unions don't use brokers so in essence this is more of an attack on the 3rd party (broker) market and non deposit taking institutions.

I could be earning twice as much working for a lender direct and not have to worry about driving all over the countryside meeting clients.

Sadly most brokers are in your position.

It is worth pointing out that average upfront commission is approx 0.6%. If you settle $2M per month this is approx $12,000 p/m before trail income. After a couple of years settling 2M per month trail would soon cross the $50,000 p/a mark.

Therefore no reason you should not be earning well over 120k if you are a full time and competent broker.

Keep at it. It takes a few years to get a substantial base of clients however once you have a strong trail book - life is pretty good!

I just have a different business model and in mine, we pass clawbacks back to the borrower. IMO all brokers should be operating with these in their standard agreements

Without wanting to offend. I don’t think the government will be too fond of banning exit fees however having broker introduce exit fees of their own (noting your fee is far more expensive than the average bank exit fee).

I'm not saying you should work for free however you should be offering your clients a long term solution and relationship. If the product is not right for their needs you can always move them - claw back will be offset by the new commission.

A one off claw back is a part of life as a broker. If it happens on a regular basis then you not matching your clients needs to the correct products.

 

[csc2]

well im copping a flogging in the thread and that is fine and was the purpose of my posts to weed out some constructive criticism of the new legislation before parliament

i honestly think the banking sector initial changes are a big step in the right direction...definitely a lot more needs to be done..

for sure there will be adjustments that will be made and if the smaller operators need more help so they can compete with the greed of the big four then so be it...

as far as im aware brokers up my way are uncommitted by all the commotion currently....nothing will happen for awhile yet....

i think brokers generally are down on deals so some will be not so happy as commissions will be a little slow to boot for some.....

ps: anyone see the old guy bagging the NAB boss last night on tv? called the banks theives for offering variable loans to punters...mind you i think hes a 100% correct...........loans should be fixed for the term of the loan...if the bank buys during high times you pay a high rate and vice versa....rates should be fixed for the term of the loan.

doesnt the bank borrow at a set rate??

 

[alexlee]

....rates should be fixed for the term of the loan.

doesnt the bank borrow at a set rate??

No, they don't. Banks can, and do, fund at variable rates. Bank's don't speculate on interest rates. They don't need to. They try to match their fixed / variable funding to their assets, and just make their money on the spread.

Should loans be fixed for the life of the loan? No doubt Swan would tout that as a great thing..... unil rates started coming down.

 

[peaches]

Commission cuts and clawbacks are the obvious easy target for the lenders, the government has just handed them perfect justification.

I can see brokers being forced to write a clause into their FBC along lines of "our service is not charged directly to you but is paid by commission from the lender. If for any reason you decide to refinance or pay out the loan and this action causes the lender to claw back commission paid to us, you will be invoiced for the amount clawed back". ... borrower will probably just go to a branch.

The majors, through their various mouth pieces have been pushing for fee for service - the government once again albeit inadvertently is playing their tune. I believe fee for service will mean the end for 90% of brokers and a dramatic reduction in real competition

 

[jonmardell]

commissions are going to be in the banks firing line for sure in the next 6 months again. I think peoples conception of brokers is they get paid too much money but in reality it is just not the case for the average broker. Don't quote me on the exact figure here but a previous aggregator displayed some figures earlier this year in a licencing presentation and it was something like 30% of the brokers did less then 600K month and 55 - 60% did less then 1 million per month in settlements. I was completely shocked in these figures cause i dont understand how they are surviving.

 

[Token Funder]

Generally speaking, Banks don't recover their costs and starting making a return until well into the second year of a loan. Addtionally, shutting down a mortgage costs money.

Preventing lenders from recovering those costs and thereby removing a "user pays" principle will mean profitable borrowers will be obliged to subsidise the others, either through higher front-end fees or increased rates.

There is no Magic Pudding.

 

[Spectre]

A few basic comments re comm clawbacks and my circumstances

1) we disclose full fees and comm clawbacks prior to even doing an application. Client doesnt like it they still have full choice to say they'll go elsewhere. I might get say 1 in 30 people not go ahead but the numbers are really insignificant.
2) clients dont go to the branch. The reason being is most branch lenders have no clue about structure, and cant see beyond bank policy.
3) with the CB - we're showing clients we're an integral part of their lending and want to be involved. If they balk at it then really they're not the type of clients we want to begin with.
4) with our CB provisions, we implement on a case by case basis. For example. If we're changing banks due to a policy change then Vic is right, we'll usually wear it due to we are getting fixed up on the other side. Its extremely rare we set up a loan just to get a clawback on it a few months later. In most cases here I'll give it to a branch to do or use NAB or someone else who doesnt claw back.
However if we do an IP build for a client, they advise from day 1 that they're keeping the property for years, then a year passes, their CGT reduces and they get the best offer ever and they'd be nuts to turn it down then usually we'll charge them. The difference here is its ridiculous for a client to make say $80k profit and we're holding the bag as a business for the bill.
5) as far as the 'legalities' of it go. I've had varying legal opinions and they're all of the belief its disclosed upfront, client gets a copy and they're fully aware to the contract they're entering into.

Theres a hell of a lot more involved but at the end of the day, nobody from clients, bank to broker is in business to lose money on a deal.

With invoicing - I've only ever had one client not pay up after we asked them repeatedly over a 4 month period and they knew full well what the agreement was. These clients we litigated on due to the amounts, we were successful in our claim for damages. In this, we ended up setting a legal precendent for other brokers (I assume nationally) that our agreement holds legal standing.

 

[peaches]

I contacted the MFAA regarding this is issue and they replied "while it is within a broker’s rights to include such provisions in the Finance Broking Contract ... attempts to recover clawback may not get the result intended and if a member should attempt to enforce through the courts or other tribunal, the overall negative effect may cause reputational loss on that broker"

We have had a limited client clawback clause for 10 years and it hasn't created too many concerns and never gone to litigation. I think we are fully justified in taking it further as otherwise the bank wins, the client winds and we just work for nothing.

 

[Rolf Latham]

.

Preventing lenders from recovering those costs and thereby removing a "user pays" principle will mean profitable borrowers will be obliged to subsidise the others, either through higher front-end fees or increased rates.

Now come on, lets not allow reality get in the way of decreased personal responseability............at the current rate of reforms ( proposed) we will soon have a new bank owned by the Commonwealth.

CommonBroke 2.0

ta
rolf

 

[Bradsdad]

All bank loans should be fixed for the term of the loan????????????

Good luck with the break costs on a 30 year loan when rates fall. This is an economic cost to the bank and there's no way these penalties will be abolished. They buy high they expect a certain return. You refinance with no DEF at a lower fixed rate and expect to win?

 

[csc2]

All bank loans should be fixed for the term of the loan????????????

Good luck with the break costs on a 30 year loan when rates fall. This is an economic cost to the bank and there's no way these penalties will be abolished. They buy high they expect a certain return. You refinance with no DEF at a lower fixed rate and expect to win?

un my opinion loan rates historically are not exactly high right now...

my opinion is based on high and low rates...if the bank buys money at say 4% then you get it for say 7% as an example....if the bank buys it at say 7% you pay 10%....

may not work but it will surely give a customer peace of mind as the bank will do due dillgence on the loan applicant initially anyway...

nothing is impossible with loans...........

im not muslim but i do like their loan ideas big time....if you dont know what i mean do a search on it......

 

[alexlee]

All bank loans should be fixed for the term of the loan????????????

This isn't so strange. The yanks do it.

Good luck with the break costs on a 30 year loan when rates fall. This is an economic cost to the bank and there's no way these penalties will be abolished. They buy high they expect a certain return. You refinance with no DEF at a lower fixed rate and expect to win?

This is true, but in the US there are no major break costs. Anyone know how the banks get around the refinancing risk?

 

[Spectre]

This is true, but in the US there are no major break costs. Anyone know how the banks get around the refinancing risk?

create a GFC?