Fee for service vs cheap rate

[Spectre]

Question

Say your broker came across funding at @6.40% variable, ongoing - but didnt make any commission out of it. Most lenders would struggle at matching this from what I see.

Thus to make it 'worth' writing the loan, the broker charges a fee, or loads the interest rate "X" points.

What would the forumites believe this should be to make it fair and equitable to all parties?

 

[Peter_Tersteeg]

I think I know where you're going with this, but how many mainstream lenders are going to discount their rates because they don't need to pay the broker?

Also what happens when the lender increases rates because the discount was unsustainable - just take a look at MyRate as an example of this. New borrowers get the cheapest rate, but existing customer rates are slowly increased with the 'funding costs'.

 

[Rolf Latham]

Not touching this vanilla gorilla : )

ta
rolf

 

[Spectre]

love to hear from some non mb's

 

[wobbycarly]

Question

Say your broker came across funding at @6.40% variable, ongoing - but didnt make any commission out of it. Most lenders would struggle at matching this from what I see.

Thus to make it 'worth' writing the loan, the broker charges a fee, or loads the interest rate "X" points.

What would the forumites believe this should be to make it fair and equitable to all parties?

As a borrower, I'd expect my MB conversation to go something like this:

MB: I've found a great rate for your new loan!

Me: Really? What's the rate?

MB: 6.40% variable

Me: That's pretty good! Who's the lender?

MB: XYZ Australia

Me: Never heard of them - are they OK? What's the catch? How long's the rate last?

MB: They are a subsidiary of XYZ International, so they are solid. The rate's good for 5 years and no exit fees after 2 years. The catch is that they don't pay broker's commissions. So if you want to go with them and get this great rate, I'll have to charge you for my time.

Me: How much do you want to charge me?

MB: A once off $xxxx.

Me: Wow - seems steep.

MB: But the rate will save you $xxxx each year, and so from year 2 you'll be $xxxx ahead and the same every year after that.

Me: Sounds OK.

Edit: Obviously xxxx and "year 2" (or whatever) will need to match up for it to make sense. I reckon if one can make back any fees/costs in 12-18 months over, say a 5 year period, then it can make sense.