Australian Finance Group Ltd (AFG) has raised the bar on transparency for the home loan market, unveiling a new standard that summarises crucial mortgage information in a consumer-friendly format for home loan customers.
Home loans arranged by authorised credit representatives in AFG’s national network of mortgage brokers now require both the customer and the mortgage broker to approve a simple one-page summary that clearly explains why the home loan product is appropriate for the customer.
The concise one-page document spells out to the customer their requirements and objectives, the recommended product, the reasons why the product was selected and any remuneration to be paid by the lender. The document also provides similar material about other products considered before settling on the final product selection.
The new one-page disclosure will be included at the top of the existing AFG National Consumer Credit Protection documents. Attaching the summary on the front page of the credit proposal ensures both the customer and the broker are clear about what is available and why it was selected.
AFG’s move pre-empts the Federal Government’s best interests duty laws currently in the parliament and reinforces to customers that they remain the number one priority for mortgage brokers.
AFG Chief Executive Officer David Bailey said ASIC challenged the mortgage broking sector to source the information and present it objectively and transparently so that customers clearly understand their options.
“Good customer service is embedded in a mortgage broker’s DNA. It’s central to their business model. To demonstrate that we are meeting the best interests test, rather than just complying with the new law when it comes in next year, we are taking proactive steps to demonstrate to customers that they have always been, and remain, the number one priority.
“We are lifting our disclosure obligation to customers and this information is presented in a way that is easy for customers to understand. It eliminates the need to scour reams of pages looking for the detail.
“AFG is not waiting for others to set our agenda. If it’s in the best interests of customers, then we should be doing it today. That’s how the mortgage broker business model works.
“The reality is the new obligations under the proposed best interests duty don’t come as a surprise to most mortgage brokers. A mortgage broker’s business is entirely dependent upon their relationships with customers. Without good customer service a customer will not return to their mortgage broker and they will not refer friends or family. A mortgage broker’s business is built on fostering long-term relationships. In the main, mortgage brokers are small businesses focused on looking after their customer in the hope that word of mouth will open up new opportunities.”
A Deloitte report into the mortgage broking industry shows nearly three-quarters of a broker’s business is generated from referrals1. Mortgage brokers now account for almost six out of 10 home loans lodged in Australia.
“Without an absolute commitment to the customer, it would be impossible for mortgage brokers to carve out such a significant slice of market share,” Mr Bailey said.
One in every 11 home loans in Australia last year was arranged through AFG’s 3000-strong national network of brokers, with settlements of more than $31 billion in the 2018-19 financial year.
“Now that AFG has lifted the bar to further demonstrate our customers are first and foremost, we are looking forward to working with ASIC and the rest of the industry on a regulatory guide to formalise the framework for the best interests duty.”