Should you use a bank or a finance broker?

Private, Commercial, Development, Business and Property Finance

Should you use a bank or a finance broker?

The banking royal commission has drawn attention to some serious problems between the banks and their customers. Evidence to the Royal Commission has shown patterns of illegal behaviour by financial institutions.

Last month the corporate regulator ASIC revealed banks and others in the financial services sector would have to refund up to $850 million that had been taken from customers without any service being rendered.

This is in spite of the fact that, according to David R Gallagher a senior professor of finance at University of Wollongong, Australia has genuine world-class financial regulators.

But Gallagher does point out that the financial advice industry has long had issues of educational standards and professional proficiency.

With the banks being accused of taking $850 million without providing these services it is no wonder that more and more people are turning to finance brokers to satisfy their requirements.

A finance broker negotiates with credit providers on your behalf to arrange loans. A mortgage broker is simply a finance broker that specialises in home loans.

There is a growing perception that a finance broker may give better advice than a bank because a finance broker such as PCL Money is not locked in with any one financial institution.

PCL Money have recently expanded their panel of lenders and are able to shop around for the most competitive finance deals on the market that can best suit their clients’ needs.

With rising house prices finance brokers are seen as possibly being a way of borrowing more as they have the potential to get a better interest rate than many of the big banks.

Research by Roy Morgan reveals that ‘Millennials’ (anyone born between 1976 and 1990) are more likely than any other age group to go through a finance broker rather than directly through a bank.

The research found that 42.5 per cent of Millennials with a mortgage five-years old or less had used a mortgage broker – a far higher proportion than any other age group.

One reason for this is that Millennials have grown up at a time when mortgage brokers were always there and so that they are seen as a very familiar way of acquiring a home loan.

37 per cent of people in the next generation bracket, ‘Generation X’ (anyone born between 1961 and 1995) that had obtained with mortgages had used a mortgage broker.

The figures are less for the older generations. Just over a quarter of Baby-Boomers (born between 1946-1960) had acquired their mortgage through a mortgage broker, while just over a fifth of those born before 1946 used a broker.

Older generations tended to be under the illusion that that if you deposit your money with a bank when the time comes to seek a mortgage the bank will be inclined to grant you a loan to reward your loyalty.

Whether you are after a home loan home loan, business finance or seeking to re-finance your existing loans at a better interest rate, call PCL Money on 02 4226 9977 for a confidential discussion.


Please note that the above is general financial information only and is not intended as personal financial advice for which you should contact a licensed financial professional.