Why education around borrowing is so important

It is no secret that the current lending environment is challenging to say the very least.  This is not going to change which is leaving a number of loan writers pondering their options - find another career or adapt to the new environment and get on with it. Simple? No, of course not.

So much has been written about changes in lender policies and practices that I would need to write a book just to go through them and trust me it would not be a bestseller! So let’s concentrate on how loan writers not only survive but thrive in this new environment. What are the potential options?

Let me give you some insights on what is actually happening in the consumer world.

Consumers are not experts on home loans. ME Bank conducted a basic property buying literacy quiz of 1000 Australians in 2018 and results showed 61% of first home buyers failed, as did 27% of owner occupiers and 25% of investors.

A recent Westpac poll showed that approximately 40% of Australians do not know how refinancing works and almost 50% don’t know what home equity means or how an offset account operates.

Furthermore the research showed first home buyers don’t understand there is no cooling off period when buying at auction or that a deposit must be paid on the day of purchase, that mortgage insurance covers lenders not borrowers and that 66% don’t know what conveyancing is.

Whilst this information is quite disturbing, what it says to us as an industry is opportunity.  As I like to tell anyone who is willing to listen to me, education is empowerment, not only just for mortgage brokers but also for the consumer and the research above clearly cements that fact and shows us that we have a long way to go to address Australian’s knowledge of all the intricacies of the mortgage world.

From the statistics it is clear that all types of borrowers are affected by a lack of lending knowledge.

We are also all aware that good consumer outcomes are paramount and the aim of regulators and lenders alike who are asking us as an industry – what are we doing to educate the consumer?

As an industry we are finding ourselves in an ever-changing environment.  The role of the mortgage broker has evolved.

We began to hold forums with our members to address the new era of consumer education which would assist in leading to a good consumer outcome. One of the initiatives that was implemented and proved very successful was a quarterly webinar for the mortgage broker clientele/consumer.

The topics ranged from explaining credit reports, living expenses, the effects of an offset account, the advantages and disadvantages of fixed versus variable interest rates, lending policies and challenges for first home buyers, how government policy will effect investors and SMSF lending parameters, to name a few.

Such a simple innovation has had a profound effect not only for the mortgage broker but also for their clients.

The opinions expressed in this content are those of the author shown, and do not necessarily represent those of No More Practice Education Pty Ltd or its related entities. All content is intended for a professional financial adviser audience only and does not constitute financial advice. To view our full terms and conditions, click here.

Related opinions

Know your financial rights

Alex Burke

Australia's financial complaints body has been given new powers. ...

View Opinion >

How has the Royal Commission affected advice affordability?

Paul Tynan

Are changes to laws making advice cheaper, or more expensive for those who need it most? ...

View Opinion >

The best super advice you're not taking

Rod Dickinson

It’s all too easy to make retirement planning mistakes and end up at a destination that wasn’t at all what you’d hoped for....

View Opinion >

The RBA just cut the cash rate to a record low

Alex Burke

What does this mean for the Australian economy?...

View Opinion >


Get the latest opinons

Enter your email address to subscribe to our Investment Series newsletter and we’ll let you know when new content goes live.

Please enter a valid email address.

Almost there!

Thank you for registering your interest in Opinions. . We’ll email you the latest content as it goes live. To complete the subscription process, click on the subscribe button below. An email will then be sent to you outlining steps to finalise your subscription.

We’re committed to helping you get the investment knowledge you want, so let us know what you’d love to see more of:

  • TV Show
  • Wealth Stories
  • Experts
  • All of the above

I have read and agree to the terms, privacy policy and financial services guide.