‘Golden opportunity’ for brokers as borrowers fear loan rejection
As many households spend $1,000 a month more on mortgage repayments, following an eighth consecutive jump in interest rates, new research by non-bank lender Pepper Money has found a majority of people accept the first loan approval they get.
Its Money Mindset Report found that while almost all Australians (98 per cent) said that taking the time to understand their options helped them more confidently make decisions, more than half (53 per cent) have previously jumped at the first loan option they were offered without looking any further.
The report, which surveyed over 1,000 individuals, found fear of rejection and time pressure were the biggest culprits.
Pepper Money chief executive, Mario Rehayem, said while people often worry about being turned down for loans, the rising pressure on household budgets means “every dollar counts”.
“When it comes to a big financial decision like a home loan, it can feel extremely overwhelming trying to understand what different loan options may be available,” he said.
“More than ever, borrowers should have an expert, like a broker in their corner to help them understand all the different lenders and loan alternatives available without all the stress.
“It’s a broker’s role to get to know you and act in your best interests — unpack your needs and goals, analyse your borrowing capacity and understand what’s important to you in a loan.
“An experienced broker will know what questions to ask to present you with relevant options and give you greater confidence in the financial choices you are making.”
In fact, more than 80 per cent of those respondents who previously used a broker said they would do so again in the future.
It comes as the third-party channel has facilitated more than 70 per cent of all new residential home loans for the first time, according to the Mortgage & Finance Association of Australia data.
While a home purchase is one of the largest investments most people make in their lifetime, Australians said they are more likely to spend time understanding their options for phone (71 per cent) than their home loan (60 per cent).
Thus, it may come as little surprise that nearly four in five respondents (78 per cent) admitted to experiencing regret at least once as a result of a past financial decision and 71 per cent of those said in retrospect, seeking additional options would have enabled them to confidently make a better financial decision.
“It’s important that borrowers understand there are often a range of alternative flexible finance options to explore beyond the banks, and they should seek out and understand their options before taking ‘no’ for an answer or jumping at the first ‘yes’ they are offered,” he said.
“In these times of changing lending criteria and tightening household budgets, many people will feel that the goal posts are shifting when it comes to accessing finance, particularly for major purchases such as a home, but just because a bank turns you down it doesn’t mean you’re out of options.
“Taking a little extra time to understand your loan options could put more money back in your pocket, help you get the best option for your circumstances, or even be the difference between getting approved for a loan or not, surely that is time well spent.”
[Related: Broker market share breaks 70% milestone]