Consumers reluctant to pay for mortgage broking services

Survey results compiled by Mortgage Choice suggest brokers could lose a chunk of business if they demand a fee for service.

According to the mortgage broking franchise, 61% of the 1,050 respondents said they would not pay a fee for using the services of a mortgage broker.

A quarter of those surveyed said they would not even consider paying a fee that was fully refundable upon the purchase settlement.

As a result of its own survey, Mortgage Choice has delayed introducing a fee until at least the next financial year.

Fee-for-service has become one of the most hotly debated topics in the mortgage broking industry, following the major banks opting to cut commissions in the wake of the GFC.

Brokers have traditionally provided their services for free, in return for being paid by lenders in upfront and trail commissions.

Commenting on the results of the survey, Mortgage Choice CEO Michael Russell said: “With most brokers currently not charging customers a fee for service, the debate is raising a lot of questions around what the industry’s next move could and should be and how lenders will react if fee for service came into play.”

“It is no surprise the survey respondents leaned very heavily towards not paying upfront for assistance that is currently free. Although more were willing to pay a refundable fee, the findings still left almost one in four refusing to even contemplate reaching into their wallet.

“Brokers need to carefully think through whether our individual businesses and the industry as a whole are in a strong enough position to forego at least one quarter of new business.

“Will consumers who are insufficiently educated as to a broker’s value simply divert their enquiry direct to lenders? Can service fees recoup such a significant loss of volume? How will lenders respond?”

Russell says the survey validated that the industry is not yet mature enough to introduce fees without penalising itself considerably.

“Based on this, other consumer research, conversations with our brokers and the condition of today’s housing finance market, Mortgage Choice is postponing any action on the fee for service front until at least the next financial year,” Russell says.

“We are taking into serious consideration our findings and will not move towards charging any fee if it puts at risk the business of 24% of potential customers.

Other key survey findings:

• Of the 39% of respondents who said they would pay a fee for service, 50% would pay between $1 and $250, 32% would pay between $251 and $500, 8% would pay between $501 and $750 and the remaining 10% would pay more than $750.
• Of the 76% who would contemplate paying a fee that was fully refundable upon the property purchase settlement, 35% would pay between $1 and $250, 36% would pay between $251 and $500, 11% would pay between $501 and $750 and 18% would pay more than $750.