choosing mortgage loans

Go Direct Or Through A Broker?

This is not the first time that we come out to state our position on this and to prove that we practice what we preach.  One question we often receive – Is there any difference whether I apply for a home loan through you (a broker) or directly with the bank?  And our response has always been consistent: By and large there is no difference and in fact it is better to come through top-volume distributors or brokers like us as occasionally we do get “preferential rates” or Special Deals from certain lenders that are not available in the open (hint: we do have one such deal right now so call us today!).  But we also add this – if there is any difference between the two approaches which may happen sometimes, then we will tell them.  This has been MortgageWise’s philosophy since our inception 3 years ago.

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I will take this opportunity now to showcase what I mean. One lender has recently launched a floating rate home loan that comes with an interest rate cap in the first two years of the loan tenure.  Now if one applies to the bank direct, this cap is set at 1.68% p.a. which is clearly stated on its website.  However if one applies for the same package through his “trusted” broker, this cap is raised slightly to 1.78% p.a.  We brokers are still paid the same distributor fee to distribute and market this package but the client ends up with a more inferior deal.  So what do we do at MortgageWise? We put it in our rates report and we tell all our clients.

What we do know on the ground is that some brokers (not all to be fair) out there may choose to keep mum and unless their clients take the effort to check on the banks’ website they may not be aware that there is actually a lower interest rate cap available at the same time.  That is certainly not to the interest of the client, and against the philosophy of our company, which is to always give you that “whole of market” perspective on all prevailing mortgage rates, and up to date as well.  In exchange, we only ask for the opportunity to present to you our views on all the factors you need to weigh and whether a particular package confers real benefit or just pure gimmicks, and that includes sometimes asking clients to simply reprice with their existing banks as the costs of switching outweighs that of interest savings from remortgaging.

We use this platform to help raise awareness of issues in the mortgage brokerage industry as well as to appeal to lenders at times.  Certainly we do respect the prerogative of the lender to set its own terms and distribution strategies, as well as to offer something “extra” for those applying directly to the bank.  However in an age where more and more homeowners are seeing the benefits of using a mortgage broker and coming to the bank through brokers rather than direct, it creates huge customer service issues that perhaps the lenders may have overlooked.  Ten years ago without the prevalence of internet, probably 8 in 10 customers would call the banks’ hotline or approach the banks directly for mortgage quotes.  Today, if I could surmise a guess, 7 in 10 applicants come through a broker or agent.  And this ratio has been rising steadily over the last 5 years if I could draw on parallels from other sectors like real estate searches, hotel room searches, etc. as we move towards a sharing and knowledge-based economy.

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Now imagine the horror and disappointment when these applicants (who already submitted their application through the broker) were told that they “do not qualify” for the extra frills as that is only made available to those who apply directly to the bank?  What do you think is going to happen?  If only 3 out of 10 customers come direct to the bank, you get a situation now where 70% of the customers could cry foul and instead of delighting customers with something “extra”, the bank could potentially end up with a floodgate of complaints from 70% of its new customers?  That is something for the lender to address I am afraid.  We will not face this problem as we choose to be transparent in all our dealings with clients.

Of course, if we carry it to the extreme, banks could choose to offer only direct packages to customers and cut off all external distribution networks all together.  To us that is like going back to do banking ten years ago and one giant step backwards for customer service experience and productivity & innovation.  For the banks, it also means hiring more internal sales people, training, office space, etc. and have every one start peddling their loan packages as the best for every client (one size fits all) and also have every client in the market applying to at least 3 banks at the same time but signing on only one loan in the end.  And will we brokers then be put out of business?  Of course that is one scenario I cannot totally rule out and we are always prepared to move on from here to another vertical in our quest for digital marketing success and customer service excellence.  The product is secondary.  Building trust and a great brand comes first.  We started with mortgage advisory simply because my team here is passionate about delivering first-class mortgage advisory and because we know we can do a much better job (than bankers) from an independent standpoint.

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I still like to keep my faith that consumers will continue to vote with their wallet.  And for as long as there are lenders who are happy to distribute their products through brokers thereby saving them huge operational overheads leading to lower costs and hence lower interest rate packages for you and me, we will continue to stay relevant and deliver our unique value proposition to our clients.  To this end, we also need our clients to stand behind us and support the mortgage brokerage industry which will then bring about more free market competition, better product features and ultimately lower interest for homeowners.  However the industry itself also need to pull up its socks and weed out malpractices and move towards a full transparency model.  As I have always stressed to my team here, it is penny wise pounds foolish to try win over a transaction but lose the trust to do a lifetime of business with our valued client.

Speak to us today if you like this “whole of market” advisory approach and you like to have a truly trusted mortgage consultant partnering you for your real estate investments.

 

At MortgageWise, we seek to provide thought leadership in the area of mortgage planning in Singapore, taking deep dive into developments and news on mortgages & helping clients track interest rate movements.  We do not just go for one-time business with clients but rather choose to build long trusting relationships by giving truly independent advice to the extent of losing the deal.  We strive to become the first-choice mortgage partner for homeowners and the creditable distributor of mortgage products for banks and financial institutions in Singapore.

 

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About Darren Goh

Darren Goh is the Executive Director of MortgageWise.sg, a thought leader in the Singapore mortgage industry, with frequent interviews and quotes by the press - Business Times, Straits Times, Zaobao and EdgeProperty for his views on the latest mortgage trends. He is an avid property investor with careers in banking & real estate before becoming an entrepreneur.
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