Cairns Mortgage Brokers director Roger Ward stands with the MFAA against fee for service, and sees the model as a "shield to divert attention" that will put Regional Australia at the mercy of an already disinterested banking sector.
Not all lending is the same
In a statement sent to MPA, Ward gave five reasons why home and business lending in Regional Australia is vastly different from capital cities:
- Security restrictions — Houses in regional areas are thoroughly scrutinised by banks’ security register or postcode appetite. In major cities, most free-standing dwellings are suitable at the highest LVRs.
- Regional volatility restrictions — If a region's major employer is closing or downsizing over environmental concerns, a town’s demand levels may get affected. Banks might then apply postcode restrictions to the security, irrespective of the borrower's personal position. No such risk exists in major cities.
- Capital city lenders (also known as CBD specialist lenders) —They are cheap, but are disinterested in regional homes being used as security.
- Regional job structures — In agricultural areas with picking seasons, some lenders implement income assessment policies that are not sympathetic to the environment. Some lenders will not consider the loan of an employee in off season, even if the employee has been employed for several years.
- Mortgage insurance availability — Mortgage insurers also “discriminate” on a postcode basis, and refer to issues like population density and distance to major regional centre. If a customer is too far away, he or she gets no mortgage insurance and needs a 20% deposit to buy a home.
Ward explained that the intricacies of lending policies can only be explained by an experienced local professional. Mortgage brokers alone can help consumers determine which lenders will work in their area.
The service offering of brokers are of great value to customers; the marketing budgets of banks will just overwhelm smaller players, Ward said. The mortgage industry has saved consumers billions in interest expenses over the last 30 years and that will continue as long as the industry survives, he added.
"The mortgage broking industry is the biggest success story in the financial services sector for 30 years. Brokers have been instrumental in driving down margins and pitting banks against each other on price.”
Depleting intellectual capital
Ward also said regional towns have seen a decrease in bank branch infrastructure and senior staff in the last two decades, taking with them services that are valued and absolutely essential for the future development of Regional Australia.
Having been a bank manager, Ward can confirm that the decision making power and specialised lending experience of banks now are just a fraction of what they were. "The outcome is lower quality results for direct channel interactions in Regional Australia, and the broker network in the only mechanism to fill that void," Ward said.