We are a comparison site for home loans in Singapore. And just like how internet and technologies are disrupting industries in a “shared economy” which brings about more efficient allocation of resources from hotel rooms to taxis, we are also bringing about more transparency & efficiency in how financial products are being marketed and distributed over time.
In fact we envisage a not-too-distant future when lenders may not even need to hire big teams of mortgage specialists as the industry shifts to one of D-I-Y self-service mode in its drive for productivity – homeowners could compare mortgages either on their own through various online tools or seek advice from independent distributors and once a decision is made, just a trip to a bank’s mortgage centre will suffice for signing and witnessing of contracts. It might even be possible to sign for the loan online through use of intelligent user interfaces supported by legal framework for digital commerce. Of course there might be long drawn with implications for conveyancing work that follows.
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Already people are going to the internet to search for and read up on the long list of mortgage terms being bandied around so often these days, eg.TDSR, MSR, DMR, FHR18, 36FDMR, 36FDPR, etc. With pervasiveness of information online, gone were the days too where bankers can sell their home loan packages in silos with no reference to competition, and consumers will not make their decision simply on the sales pitch of one banker but a handful. What comparsion sites do is simply to fill this gap where there is a need to compare, understand and decipher which loan package presents the best overall value to a homeowner.
We can look at the purpose of comparison sites on mortgages from two perspectives – from the point-of-view of the lenders, and that from homeowners.
PURPOSE FOR LENDERS
At first glance, some lenders may think that comparison sites make information more transparent and hence that is not good for getting market share. But that is old school thinking – just put out more salespeople and get them to hard-sell on the merits of one’s product offering, put in the usual commission scheme based on market and the numbers will come in. What lenders do not realize is that there are “hidden costs” behind such traditional model which introduce “inefficiencies” into the system, for example:
- Bankers in their quest to meet sales quota or higher tiers of commission will engage in “product-peddling” and not selling what istruly in the best long term interests of their customers. End result is existing customers become angry or dissatisfied with service from the banks or feel cheated by bankers who only present “one side of the story” knowing full well this is likely a one-time transaction and they will not have to “deal with” the same customer if they changed jobs later. Dissatisfied customers will attrite from the bank once lock-in ends and the bank goes through the same vicious cycle of paying high acquisition costs for new customers but only to have them exit the bank later. This happens when you do product peddling and not doing customer-centric selling.
- There are also inefficiencies when the same homeowner talks to 3 different bankers and very often applies to all 3 or more banks as he is unable to decide still, or is simply confused by the bankers with their own agenda. In the end only one loan can be signed. If every applicant applies on average to 3 banks before he makes a decision, the market as a whole has to cater to 3 times the demand in terms of resources needed for selling, basic pay for more sales staff, credit processing time, costs of generating reports and running searches, etc. A smarter bank will do away with all these “hidden costs” and pass the savings back to its customers in the form of lower interest and thereby taking more market share.
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In fact banks themselves are not new to the model of intermediaries as they have long diversified from a pure traditional lending business into one of fee-based income via distribution of various insurance and investment products, especially in the area of wealth management. However when it comes to their own proprietary products like mortgages, for some reason, some are still stuck in the old mode of “internal sales force doing product-peddling.”
To be fair, the banks’ fear of profit erosion is justified as with transparency of information in the internet age, competitive market forces take over and very often that brings down what used to be fat profit margins. Just look at what has happened to airlines or telco industry when the government opens them up to free market competition. In the end consumers always benefit. Businesses should recognize the imminent forces at play over the next 10 years and be ready to relook at new ways of competing for market share at reduced but sustainable profit margins, and that certainly calls for more astute cost management. Banks must also position themselves to take advantage of this shifting pattern in consumer decision process where information is always at fingertips.
Comparison sites are not the culprit of industry margin erosion but simply filling a void brought about by technologies in the internet age. It has already claimed the dearth of print Classified Ads for property and automobile searches (almost everyone goes online for such searches now). In fact technologies in the larger context of social media and review sites has already redefined many industries from insurance to hotel rooms.
PURPOSE FOR HOMEOWNERS
We have already covered the most obvious purpose of comparison sites for homeowners – making information transparent and thereby helping them to make the most informed and intelligent decision. To this end, comparison sites that come with a dedicated team of experienced and professional mortgage consultants will add even greater value.
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There are other side benefits of working with a comparison site for mortgages which also doubles up as a mortgage consultancy firm. This is best encapsulated in our very own V.A.L.U.E.S. model explained in an earlier article, but can be best summarized as – leveraging the best domain expertise for every specific need in one’s life, especially when it comes to decisions in financial or a technical field. If one embraces the concept of 10,000 hours that a person needs to put in before he truly masters or become an expert in a specific field, then one will surely benefit from the input and advice given by such an expert in mortgage planning, not unlike insurance, retirement or tax planning. Just like how everyone of us has a job where one will be most knowledgeable in and always staying updated to via reading and following up on industry news and developments.
We are not saying one will need certain qualifications to be able to make a simple decision on which mortgage packages to pick, but we are saying some may use a tip or two from specialists on mortgage structuring who does this full-time and has an overview of all the packages in the market.
At MortgageWise.sg, we seek to provide thought leadership in the area of mortgage planning in Singapore, taking deep dive into market developments & helping clients track interest rate movements. Make a difference to the way you refinance home loan today by consulting with a professional whose insights, experience and independent advice you could benenfit from, instead of going directly to the banks for their “standalone” views. We strive to become your first-choice mortgage partner and the creditable distributor of mortgage products for lenders in Singapore.