by Jenny Ruth
The latest Consumer story providing advice on how to save money on your mortgage displays a distrust of, and prejudice against, mortgage brokers, according to New Zealand Mortgage Brokers Association (NZMBA) chairman Brian Berry.
"The public looks on Consumer magazine as the definitive source of impartial information on products and services, but they seem to be biased against brokers," Berry says.
Berry did have considerable input into the feature and says he succeeded in modifying the degree of prejudice shown. For example, the story recommends people deal only with NZMBA members.
But Berry objects to comments like, "brokers get paid by the lender, which means they are not actually working for you."
Such statements are frustrating and are contrary to the NZMBA’s code of ethics. "They’re basically saying that, because brokers get paid different amounts by different lenders, that’s going to influence their decision."
Brokers should act in the best interests of their clients regardless of the fees paid, he says.
The story also notes that the NZMBA requires members to use a minimum of six different lenders, but Berry says it doesn’t make plain that that is the "absolute minimum." Even if a broker used only six, they would still need to be aware of what the full range of lenders are offering (by using websites such as Good Returns' rates table).
Consumer also omitted other facts Berry would have liked to see included, such as that between 28% and 29% of all mortgages are now arranged through mortgage brokers.
Berry is also concerned about inaccuracies in the story, such as that you can pay off your mortgage quicker by paying more frequently and that the cheaper your mortgage is to start with, the less it will cost you over time.
The term of a mortgage is set at the start based on how frequently payments are made. It’s only if a mortgage was originally set up with, say, monthly payments, and the borrower shifts to more frequent payments that the term reduces, Berry says.
And if a mortgage begins with a honeymoon deal and thereafter switches to the lender’s normal rates, it’s unlikely to be the cheapest alternative, he says.
Possibly, what irks him most is Consumer’s marked preference for Kiwibank. "We think Kiwibank should definitely be on your shortlist," Consumer says, outlining how much cheaper Kiwibank’s floating rate loans are compared with the major banks. It does note that while Kiwibank’s fixed-rate deals also tend to undercut the major banks’, they do so "only marginally."
The emphasis on Kiwibank is unfair to lenders who have loyalty schemes and offer ongoing discounts. And just because a loan starts at a discount to the market, doesn’t mean it will continue to be at a discount through the life of that loan, Berry says.
Kiwibank currently doesn’t deal with mortgage brokers, although it intends to at some time in the future.
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