How much do Mortgage Advisers get Paid?

Let’s peel back the curtain to see what’s really going on inside your favourite mortgage brokerage: How do we get paid? How much do we get paid? Why do we recommend one bank over another?

 

We have hit the headlines this week. Banks, insurance companies and advisers (i.e. us) are in the spotlight in Australia and NZ. One of the issues raised was how and how much we get paid. It is fair to say there are some interesting conversations going on in our world at the moment.

 

At Velocity we pride ourselves in doing the best possible job for you and giving you advice that is best for you. Apparently that isn't that common in financial services.

 

We currently get paid a commission from the banks and insurance companies with whom we place your business.

 

When we first meet you, we disclose how much all our providers pay us, even though there is no obligation for us to do so. Yes, each provider pays us slightly differently, so all we can do is explain that. It is also up to us to give you solid reasons why we recommend each product and company we use. 

 

We've just done a quick tally up and below you’ll see the percentages of business we have placed at all the home loan lenders we use (based on numbers of new settlements).

 

As you can see, it is "horses for courses". We don't have favourites. All the banks have their place and all our clients are different.

 

We try hard to operate with maximum transparency. Always feel free to ask us to justify our recommendations, as we want you to have confidence that we are doing a good job and working in your interest.

 

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ANZ: 34%

BNZ: 16%

ASB: 15%

Sovereign Home Loans: 12%

Westpac: 11%

TSB: 2%

The Cooperative Bank: 1%

Non-Bank Lenders (Avanti, Liberty, BlueStone, Resimac): 9%

 

Brendon Ojala is a Registered Financial Adviser with Velocity Financial. No investment decision should be taken based on the information in this blog alone. A disclosure statement is available free of charge upon request.

Fixed vs Floating: New Year, New Interest Rates?

Starting off 2019, interest rates are staying low but the Reserve Bank may have a trick up its sleeve that could have a downstream influence on the great fix versus float debate. Brendon explains.

 

There has been some post-Christmas sharpening of home loan interest rates. 

You will see a 3.99 per cent for one-year and two-year loans currently being advertised. This normally applies for "main bank", owner-occupied clients (in other words, not for low deposits or investor-only clients).

 

From an economic perspective, there doesn't seem to be any upward pressure on these rates for 2019. Interestingly enough, the only pressure that may come to bear is a potential Reserve Bank/government regulation requiring banks to hold more capital.

 

The Reserve Bank has suggested that the percentage of "money [that] banks have in hand per amount of loans outstanding" may need to increase to better protect the banking system from any economic shocks (known as capital adequacy ratios). If this is implemented, it will effectively increase banks’ running costs. Unless the shareholders are willing to take lower returns (??!!), then the customer will pay—at banks, this means increases in interest rates.

 

So, should you fix or float?

 

Securing an interest rate under four per cent isn't bad!

 

Up until now, most of our clients have been fixing for one year because that was the lowest rate and because the expectation was rates would stay low for another year, giving time to re-fix in a year for a still low rate. 

 

The only spanner in the works to this approach is the possibility of the above regulatory change, which still remains to be seen. The potential for changes introduces some uncertainty to the mix and some of our clients may choose to minimise that risk by fixing for two years, at what is now a great two-year rate.

 

Be aware that all clients won't get that exact rate, as it is case-by-case, bank-by-bank. If you have good equity, you should be getting close. Note also that everyone is different, so how long you fix your loan for may be different than the next person.

 

Also note that it is often wise to keep some flexibility. Channelling any cash surplus to your home loan in a smart way can surprise many with the difference it can make.

 

We can work that all out for you.

 

Brendon Ojala is a Registered Financial Adviser with Velocity Financial. No investment decision should be taken based on the information in this blog alone. A disclosure statement is available free of charge upon request.

October’s Market Turbulence: What Does it Mean?

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By Amanda Chadwick (Authorised Financial Adviser of Forsyth Barr Wellington)


The share market took a tumble (or was it more of a stumble?) last week. Headlines

warned that KiwiSaver accounts could halve in value. Was it just media hype?

What are the experts saying? To answer these questions, we approached Amanda

Chadwick of Forsyth Barr to comment on the wobbly market and how we should

respond.


Between October 5th and 11th 2018, global sharemarkets hit turbulence, with

the MSCI World index (in New Zealand dollar terms) falling 6.2%, the Standard &

Poor’s 500 index falling 6.7% and the NZX 50 index declining 5.4%. While the fall

occurred sharply, given the same three indices were up 19.6%, 27.0% and 15.0%

over the preceding 12 month period, Forsyth Barr did not consider the pullback

to be unexpected. By the time things had settled a week later, the same three

markets had rebounded by 1.0% to 2.0% of their initial fall. In some cases,

market volatility can provide an opportunity to invest in quality companies at

more favourable prices.


Market behaviour (as with everyday life) is a combination of reality mixed with

emotion. It is not unusual to see an initial dramatic reaction to market news or

events, often presuming the worst, rather than taking the time to understand the

cause or context of the situation. Human nature has a knack for focusing on

negative news and amplifying its impact through isolation, which is why it’s

valuable to have an Authorised Financial Adviser providing much needed

perspective and strategy. One of the first questions to answer in response to any

sudden market movement is “what’s the cause?”


When reflecting on last week’s correction, the main contributors to the sell-off

were largely a mixture of:

  •  the United States Federal Reserve signalling potential interest rate rises;

and

  •  continuing trade tensions between the United States and China.


Investors with their own investment portfolios, should seek advice from an

Authorised Financial Adviser they can have regular contact with, who provides

proactive updates and communication and is readily available to ‘chew the fat’ in

response to market events. An Authorised Financial Adviser’s real value is not

just managing a portfolio to generate returns, but in navigating the client’s

investment experience. It’s important to consider everything from personal life

goals and objectives, portfolio expectations, the economic landscape, and how to

position the portfolio at any given time, given both the client’s needs and risk

appetite (or lack of it), as well as the stage of the market cycle.

Amanda Chadwick, Authorised Financial Adviser, Forsyth Barr Wellington.

Amanda Chadwick is an Authorised Financial Adviser with Forsyth Barr Limited in

Wellington. For further information on any aspect of this article or to arrange a

meeting to discuss your investment objectives in confidence, call 0800 367 227 or

email amanda.chadwick@forsythbarr.co.nz. This column is general in nature and is

not personalised investment advice. Disclosure Statements for Forsyth Barr

Authorised Financial Advisers are available on request and free of charge.