Chasing the Deal of the Day – Good Luck with That

Over the many years that I have been dealing in mortgage finance I have learnt a lot about this game, especially given the fact that at any point in time I’ve had access to over 600 different loan products at my disposal; from different credit policies, to loan structuring to maximising borrowing capacity etc. But the most important lesson in my personal experience has been that no matter what the banks and other lenders say or how they price their loans today, one thing’s for sure there are no guarantees around what the lender will do next.

This lesson was thrust in me and my team’s face during the GFC. Lenders once market leaders on interest rate pricing, who were well supported by both their direct branches and brokers alike, literally overnight, either disappeared, went broke or were bought out by larger lenders. The immediate impact on those borrowers was higher interest rate pricing or exit costs in the thousands. This, in the wash up of it all, resulted in the borrower actually paying more for their borrowings that they might have if they had not chased the lure of what were ultimately deals that were too good to be true.

So my lesson and that of the team in all that is to ensure we brief our clients on being realistic about what some lenders may or may not do. Don’t get caught up in the media feeding frenzy that occurs when a bank or lender makes a decision on their interest rates.

It is our job to keep the lenders on their toes about what they charge our clients and we won’t for a second tolerate any lender overcharging them through uncompetitive lending products. We work for our clients not the lender who advances the money.

I raised this point in this month’s newsletter because of the recent ANZ decision to lift their rates outside of the RBA monthly decision. Any decision by a lender on our panel to raise rates is taken very seriously by us as we immediately analyse what the financial impact on our clients is, to ensure they still hold a competitive product. What’s interesting about the media hype and government condemnation of ANZ’s move was that when ANZ first decided to lift interest rates due to costs of funds they initially moved at 6 basis points and then pretty much all the other major and minor players moved rates even higher than ANZ 6 basis points movement. Some as much as 12 basis points. ANZ recent movement was another 6 basis point, basically to bring them into line with the other lender rates, so prior to that decision, they were in fact cheaper – but that was pretty well lost in most press stories.

Now I don’t want you to think at any point that I’m sticking up for these lending institutions, but what I am telling you is that the devil is in the detail and moving lenders is costly so the numbers need to stack up. Our job is to make sure they do. We’ll do the analysis and shopping around to ensure we obtain a great and competitive deal for our clients, and we study hard to try to determine what the lenders pricing position is for the short to medium term. It’s a competitive market out there, so we believe we can do the best for our clients. However, we will never make silly statements about guaranteeing you the cheapest deal of the day or that the lender won’t put your rates up. If anyone is giving these types of assurances they are lying to you and have their own vested interest in mind.