If you haven’t seen the recent report by the Productivity Commission, it’s a harsh report about the mortgage industry based on poor research and the lack of accurate data. It’s in need of a rewrite, actual research, and factual data.
This document is a huge 628-page report with confusing language and a vast lack of solid data to back up its claims, which is a worrisome aspect of this report that was recently released.
This report builds a draft based on interest rates from brokers as compared to other channels. “Home loans originated by mortgage brokers have only slightly lower interest rates than those originated through direct channels. Further analysis is needed to inform the Commission’s view of the sources of such differences and whether they are significant.” From a part of the report.
The report also claimed that “brokers are not a low-cost option, potentially adding 16 basis points in cost to interest rates.”
It’s important to note that this 16-point claim isn’t based on the Productivity Commission’s due diligence, but instead on a tabloid research report written by Jonathan Mott, UBS analyst entitled Are brokers overpaid?
MFAA CEO Mike Felton has already deemed this tabloid report misleading and incorrect when it was released in May of last year and received a lot of media coverage.
Believe it or not, this isn’t the first time an inquiry has made use of UBS research and tried to make it viable about the mortgage industry.
UBS’ Jonathan Mott also wrote a report that claims up to one third of Australian mortgages are possibly “liar loans” in September last year. In October, Shayne Elliott, ANZ chief executive, was questioned at length because of this report during the bank review in Canberra.
When the committee chair, David Coleman MP questioned the ANZ boss, Shayne Elliott, Elliott set the record straight by saying that 45 per cent of ANZ transactions were subject to inaccurate or false borrowers’ representation. In other words, borrowers sometimes provide false or inaccurate data.
Missing from the Commission’s report were articles that explain how brokers don’t merely rely on customers’ forms. Mr. Elliot said, “We’ve been in business for 185 years, and it’s not new to us that sometimes customers forget to tell us all the full details of their financial situation. So, we have all sorts of systems in place and checks and balances to mitigate that, and that’s really very important part of the process.
Shayne Elliot also steered the attention of the committee to the UBS survey’s size by comparing it to the amount of ANZ’s home loan customers.
ANZ’s CEO said, “We have millions of mortgages on our books alone at ANZ. The entire sample size for that survey was fewer than 1,000 for the whole country. Based on our market share, that means that survey was based on 150 ANZ customer. To then extrapolate that, to say that that’s true for the whole million, I think is a bit of a stretch.”
In all fairness, the report does note that lenders were unable to provide data that could help boost or refute the UBS findings. They used only the data they could find. “Surprisingly, for such a major-cost item, most lenders were unable to provide the information required to evaluate whether brokers are a lower-cost distribution network. Cost data appears to be a black box for this industry.
Don’t you think it’s time we get the facts correct to see what’s really in the box now?
First Choice Mortgage Brokers are a Sydney Mortgage Broker operating under the Australian Credit Licence Number: 382370