Property Sales    Property Management    Mortgage Brokering

Fake News From UBS!

Reference to the article reported on ABC News (see attached) which reported the findings from UBS on the high cost through the brokering channels and that these costs have been transferred to consumers.

This is really a classic form of Fake News.   What is surprising is that it comes from a so called ‘reputable’ bank such as the UBS.  I am extremely disappointed considering my years of banking experience and always having high regards for UBS bankers.   In this case, it is obviously a misreporting and is doing lots of harm in the consumer market.

Highlighting a few key issues from the report:

  • It states that brokers get an average of $4.6K on an average loan. This averaging is total not correct.  What is important is to look at what is being paid to brokers, which is typically 0.6% upfront and around 0.15% as a trailer.   If you work on the average loan size of around $400K, the commission that brokers get is $2.4K upfront.
  • It states that it cost 0.16% more on a loan and seems to imply that if you take a loan through the brokering channel, it will cost the consumer 0.16% more. The fact is that this is entirely not true.   If you go into a bank to get a loan and is offered 4%, your broker will get exactly the same rate at 4%.   The additional cost to the bank is overall still cheaper than if they were to have their own home loan specialist.   The cost to the bank to employ a group of specialist is by no means cheap.   Consider the cost of infrastructure such as rental of office space, fixed overheads for base salary and salary to support staff.   Besides, the banks incur a fixed cost once they manage their own loan specialise.   Whereas, in the brokering channel approach, what the banks are paying are only variable cost as no brokers are paid a cent if there are no loans written.   So, the logic that it cost the bank 0.16% more is totally misunderstood as it would cost more to the banks if there were no brokering channels.   This is evident in banks from the major financial hubs such as Singapore, Hongkong or Shanghai.   I am surprised at the apparent ignorant of the UBS report….. was this intentional to mislead, who’s to know?
  • Finally, it states that brokers face an uncertain future due to robo-advice and bank cost cutting. Face it, no one can get full advice from the internet.   There are still many structures that needs to be explained and brokers are there to assist.   Besides, there is no cost to the consumers in terms of securing a loan.   Why not go to a broker when you get to be offered the best available loan structure that will meet your specific needs?   You can’t get that by going into a bank directly.   They are never neutral as each banker at the door have a target to meet and they can’t be sending you next door to another bank, unless they are thinking of being a broker very soon.

It really surprised me to see such a report by a reputable company.  Beware of what you read!