Photo: RNZ / Alexander Robertson
Mortgage brokers are concerned a Commerce Commission suggestion they present buyers with at least three bank offers could end up making things harder for borrowers.
In its final report into the banking sector, the commission said mortgage advisers needed to "become champions of price competition" and where possible they should present clients with at least three actual offers from lenders.
They should also highlight to clients any banks they were not able to work with, as well as the interest rates that might be available there.
The commission said about two-thirds of new home lending by value was happening through mortgage advisers. In 2014, it was just under 30 percent.
Squirrel chief executive David Cunningham said the suggestion the adviser should present at least three offers was a "solution in search of a problem".
"The fact is that mortgage advisers are engaging with different lenders on an almost daily basis as part of settling deals, and we're also constantly reviewing different bank credit policies to help us understand who's prepared to lend and at what rates.
"So, at any given time, we know where pricing is sitting across the market and this informs our recommendations to clients in terms of which lender to submit an application to. "
A number of banks provided special rates to clients of advisers, and the requirement for three offers could slow the loan approval process "massively", he said.
"It wouldn't just impact the adviser end of the spectrum either. The number of applications submitted to each bank would skyrocket, with lenders having to go through a full credit assessment for loans that they're only going to get 33 percent of the time.
"As it is, it can easily take one or two weeks to secure a loan approval, and that would balloon massively if this recommendation were to be implemented. It would bog down the entire system, while achieving nothing in terms of delivering greater competition in banking."
Loan Market adviser Karen Tatterson said a good initial interview with a client would result in an adviser being able to decide which bank was the best fit. "Bank interest rates tend to be very similar but it is often not the rate that is the key component of the advice, it is about getting the best loan product to suit the client needs and circumstances.
"Most mortgage advisers know what the rate offering is with each bank, therefore getting three offers for pricing purposes, as indicated by the Commerce Commission, is effectively redundant."
She agreed it would lead to significant delays.
"The majority of buyers are not focused on the rate, they are predominantly focused on getting an approval. The workload will increase significantly, which could result in a reduced level of customer service to the consumer.
"My overall opinion is that a good mortgage adviser sets out to understand the client's circumstances and needs at the beginning of the journey and agrees on a best strategy with the client, which includes the most suitable bank - the need to get three offers completely undermines the 'advice' piece of the process. If we are required to do this then we effectively become order takers and not advisers."
Massey University banking expert Claire Matthews said it would be a lot of work for banks and add no real value for anyone.
"Advisers have access to information and can get indicative offers from lenders that provide borrowers with sufficient information to make an informed decision about their best option. Once they get the formal offer from that lender, they have the option to decide not to take it if they decide there is something in the formal offer they don't like.
"I think this would risk lenders choosing not to work with mortgage advisers because they would be aware that in many cases they were simply one of the 'other two' offers required to meet such a rule."
