The Mortgage and Finance Association of Australia (MFAA) today highlighted the need for mortgage brokers to provide disclosure to customers, saying it will not only increase business now, but that it will benefit brokers when new national credit legislation comes into place later this year.
“There are other major advantages to this approach. Our latest Mystery Shopper report carried out towards the end of last year clearly explains that brokers who made disclosures about supervision, complaints, procedure and commission were much more likely to get the sale,” Mr Naylor said.
“The report showed that when brokers clearly disclosed commissions, the shopper’s average likelihood of intention to borrow with and recommend that broker, was 7-7.9 (out of 10). Conversely, those who do not disclose well received ratings from 3.3-4.3.”
The Mystery Shopper report is carried out by enlisting a number of people who are in the market for a home loan; either as first time buyers or investors, refinancers and occasionally next time buyers. Shoppers are instructed to make an appointment with a broker, and execute a relationship, should they choose.
According to the report more than half of the brokers (57.1 per cent) disclosed their commissions or how they were paid, up from 43 per cent in January 2008. [NB: under current broker regulation in WA, NSW and Victoria brokers are only required to make these disclosures once they are acting for the borrower; there are not such requirements in other states].
The report also illustrated a need for brokers to increase loan fee disclosure with customers and to provide better explanations of supervision and complaint channels.
“As in all business, it’s clear that transparency and openness is key to winning customers,” Mr Naylor said.
Other findings from the report include:
- Brokers were generally regarded as professional, scoring 78.2 per cent, and there was a slight year on year improvement.
- The majority (84.8 per cent) of shoppers perceived brokers to be honest
- In 81.6 per cent of mystery shops, the broker was considered to have a comprehensive knowledge of the products offered