THERE’S a new and much faster way to get a mortgage, but opinions are divided over whether it’s a brilliant time saver or a dangerous gimmick.
Tic: Toc is a fintech that claims to offer “the world’s first instant home loan” to a select group of Australians: those living in capital cities who have at least 20 per cent in equity or a deposit.
After three years in development and $9 million invested in its algorithms, the online start-up promises a full home loan approval in as little as 22 minutes.
“Other ‘online’ home loan providers digitise only part of the process, so while their
application may begin online, it ends in the exact same way every other traditional home
loan process does,” founder and chief executive Anthony Baum said.
Automating the property valuation, serviceability and credit checks, validation and responsible lending steps in the home loan approval process saved the lender and time and money, Mr Baum said, allowing Tic: Toc to offer a more competitive home loan rate.
“We are passing that saving on to the consumer,” he said.
Tic: Toc currently partners with the Adelaide and Bendigo Banks, but plans to sign on other lenders to allow users to compare rates.
It offers a variable owner occupier rate of 3.69 per cent, with no application, settlement or valuation fees. Comparable retail rates at Adelaide Bank can be as high as 5.25 per cent.
THOUSANDS AT STAKE
But not everyone is impressed with Tic: Toc’s offering.
Mortgage brokers have come out swinging, questioning how the “robo approvals” can possibly replace the time-consuming process, which can take weeks to sign off.
“Taking out a home loan is one of the biggest financial commitments a person can make,” Mortgage Choice boss John Flavell said.
“It is not a decision they take lightly and not one most people wish to rush. Borrowers want dedicated face-to-face interaction with someone that they can trust to work in their best interests.”
The question of whether brokers truly serve borrowers’ interests, however, is the subject of intense scrutiny, with the financial services regulator ASIC currently investigating the industry over its remuneration structure.
Choice has called for a ban on commissions to force brokers to “act in the best interest of their clients”.
“Getting a poor loan can mean tens of thousands or even hundreds of thousands of dollars more over the life of a mortgage,” the group’s head of campaigns and policy Erin Turner said.
“This industry needs a major change. It’s time to cut out the dodgy practices — from bonuses or trips to the Caribbean for flogging loans to commission arrangements that mean that lenders interests get put ahead of customers.”
BROKER VS DIRECT
While more than half of mortgages are now obtained through brokers, Ms Turner said most Australians would be better off going straight to the banks and comparing deals.
“Online options are really good for people who just want to find the cheapest loan out there,” she said.
For those with more complex requirements, she said, it was important to find the right broker — one who could “help educate you through the process.”
Mr Flavell said that if Australians didn’t believe they were getting a valuable service from brokers they would “vote with their feet”, but instead increasingly sought help in navigating the “complex” home loan market.
“It is now more important than ever for borrowers to be seeking the right mortgage advice for their needs from a professional they can trust.”
Mr Baum countered that brokers painted the market as being “more complex than it is … to suit their marketing”.
“We’re more focused on a meaningful but condensed offer that drives costs down,” he said.
