Sydney Property Market Update 13/10/2018
This week I wanted to talk about Brokers, the Finance Industry and the recent Royal Commission into it.
In case you haven't noticed we are in the midst of a credit crunch where many buyers are experiencing difficulty in obtaining finance.
Ultimately this is a good thing as the risky lending practices of profit hungry Banks have been reigned in. However, in the short term there are some innocent victims caught up in it who are either unable to get finance at all or the amount they can borrow has been significantly reduced.
One of the main recommendations made by the Royal Commission was to explore the bonuses etc that Brokers make when assisting clients to obtain finance.
I can only speak from my experiences but we have to be careful here.
In any walk of life there are unfortunately unscrupulous and dodgy operators who don't think twice about taking advantage of clients for their own personal gain. Usually in the distinct minority, they still nevertheless can cause a huge amount of damage to both the client and the image of their industry as a whole.
My main concern though with further regulating brokers is that it may result ironically in a worse outcome for the customer.
How? Well let me explain
In my experience, GOOD brokers tend to get a quicker and better outcome for customers than those who work directly for the bank.
Two main reasons. The first is they simply don't get paid if the client fails to secure finance. But the second more important point is they are free to source the best deal from whichever organisation they can find who is willing to offer it.
If you deal directly with a bank they will only sell you the products they have. If they are more expensive or less suitable than others offered by their competitors they are unable or more importantly unwilling and not interested to act.
Good brokers are rewarded for helping their clients secure finance and save money where it may not have been possible if they acted for themselves.
It's a simple as that.
If the current setup is changed too much then we could find ourselves in a landscape where there is less competition and flexibility in sourcing specific products, which ultimately leaves the banks in an even stronger position to sell the general public what they want unopposed.
Hardly a better outcome in my opinion.
That's it from me. Have a great weekend and I'll see you next time.