Advisers reject ComCom emphasis on price, multiple applications
Mortgage advisers are rejecting the Commerce Commission's recommendations that they should place more emphasis on price and that they should be submitting applications to multiple lenders for the same home loan.
Tuesday, August 20th 2024, 3:00PM 
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“The statement that ‘mortgage advisers should also put more emphasis on price’, is in some ways irresponsible, as every borrower is different,” says Finance and Mortgage Advisers Association of New Zealand (FAMNZ) country manager Leigh Hodgetts.
“While the interest rate is important, there are many other factors around individual circumstances that must be considered when a consumer takes a loan,” Hodgetts said.
Adviser Sarah Curtis, who was instrumental in getting the commission to back down on a number of aspects of its interim report in May, also criticised the commission's continued emphasis on price in its final report.
“Reducing the value we add in the adviser space to 'fighting for better rates' doesn’t fairly reflect the work advisers do in providing advocacy, supporting clients through the process step by step, or the time spent on building better financial literacy outcomes for New Zealanders,” Curtis said in a post on LinkedIn.
Curtis was still glad that the commission has changed its view on the value advisers can add, and Hodgetts also applauded the regulator's “turnaround” from its “baffling and embarrassing” draft report.
Squirrel chief executive David Cunningham also weighed in on the multiple application recommendation, saying advisers already know what each bank's credit policies and pricing is.
“We don't need to send it to three banks to get three yeses or maybes or nos, because we already know. All it would do is add cost,” Cunningham said.
Loan Market's Bruce Patten has a similar view: “We know what the banks are offering. It's not going to drive the price down.”
The commission said that where possible, advisers should present at least three actual offers to their clients "to ensure consumers are making informed choices."
Wellington-based adviser Andrew Perry of Mortgage Market said the credit risk posed by a would-be borrower is often more important than price when the adviser knows there's limited appetite among the lenders for some borrowers.
Perry noted the commission appears to think first-home buyers have unlimited options but unless they have a 20% deposit, and only about half do, they face rationing because of the Reserve Bank's loan-to-valuation ratio restrictions.
Those TMM spoke to were happy about some of the commission's recommendations, particularly that lenders should pro-rata all clawbacks of adviser commissions and bank cash contributions to consumers and on banks investing more in better digital systems.
“Only last month we asked banks to improve technology and systems so that advisers can serve consumers better, and this report echoes our call,” Hodgetts said.
Financial Advice NZ (FANZ) chief executive Nick Hakes said he will be seeking “greater clarity” on the recommendations on mortgage and lending advice.
“The detail will determine whether there are unintended consequences that could counteract competition.”
| « Mortgage advisers should put greater emphasis on price: ComCom | Kiwibank grows mortgage book 2.7 times faster than market » |
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Comments from our readers
What will happen to turnround times?
I can just see banks welcoming all these new applications. And each application will require a credit check - another unintended consequence.
John Small and his team demonstrates once again that they aren’t adding value to taxpayers. Must be about the fourth industry in a row now that people are saying the Commerce Commission are not achieving anything worthwhile for consumers with their reports published.
Already, banks cannot cope with the workload, and clients are going direct to banks, or missing settlements. By sending applications to multiple banks we are further tying up resources. And the banks KNOW what deals are going where, so they are prioritising and pricing accordingly. They can choose the deals they accept and work on (credit history and credit checks give a lot away). Out of the applications sent to four banks, only ONE will get settled, meaning only 25% of deals submitted are going to draw down.
We know our business, we know our clients, we know our stuff.
I think Mr Small needs to spend a few months working alongside an adviser (and paying the industry costs we are burdened with) to get a taste of reality.
And Mr Small - if you do get down off your high horse to read this, I am more than happy to lead you through the path of reality.
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Over 60% of Kiwi's trust Advisers with their mortgage requirements, something that Comcom seem to ignore. Try harder next time.