A mortgage broker is supposed to have the best interest of the client at heart when sourcing the best options in home loan finance available. The local origination industry in South Africa works closely with their banking partners to ensure that both the consumer and banking industry benefits from mutually beneficial relationships.
Consumers are afforded the ability to compare product offerings in the market whilst getting the best deal and our banking partners can outsource certain functionality to ensure efficiency for shareholder and internal stakeholders.
More than half of South Africans make use of the specialised service the mortgage originators offer to the market and is most certainly the easiest way for consumers to get multiple offers from one source
none of the banking partners have ownership in a mortgage originator in SA. Banks also do not prejudice any of the banking contracts one over another. Here’s how things work in South Africa.
Remuneration: Bond originators earn a set fee per bank based on the registered amount of the loan, and the bond consultant in the market working under the originators earn the same fee across all the major banking partners also based on the registered amount. This avoids the possible negative selection from the consultant and allows the consumer to truly get the best individual deal for them as there is no financial benefit for the consultant to choose one banking partner over another. The consumer always has the view of all offers made by the banking partners and commission rates do not direct the consumer to one product over another.
Regulation: The industry has been self-regulated under MORCSA (The Mortgage Origination Regulatory Council of South Africa) for the past several years, however going forward the industry will fall under the Property Practitioners Bill.
Code of good practice: Their code prescribes that the mortgage broker / originator cannot prejudice the borrower and only allows for the provision of factual information from all banking partners. This should prevent the broker from making any decisions that is in his financial interest and always what is best for the consumer, even in some cases referring the client to a competitor if they can offer a product better suited to the needs of the client.
Lower interest rates: Customers that use a mortgage originator normally obtains a better interest rate vs. going directly to their own bank. There are several reasons for this, one bank might be stronger in the self-employed market whilst the other is a building loans specialist, thus comparing the banks allows for the consumer to get the best offer on the table. Also, banks compete for the consumers business. Allowing the consumer to compare their own banks offering to other banking partners ensures they get the best deal, something that they would not be able to do if they go directly to their own bank.
Article published by the Property Professional