Comparison Site Confusion

Luke* had an existing home loan for about $750K.
 
He’d been in his current loan for about three years.
 
Despite the fact that he’d spent a lot of time researching his current loan and he was sure that he’d secured a “good deal”, Luke had noticed that his interest rate was about 0.65% higher than many of the competitive rates in the marketplace1.
 
So, once again, Luke spent countless hours on comparison sites and making contact with ‘internet lenders’ trying to find “the best rate” to refinance to. 
 
As part of his research Luke came across our website.
 
Over the course of many hours - numerous phone calls and emails - we did our best to have Luke understand our service proposition – the need to look at the total cost of a loan (not just rate) and the significant effects of commission rebates.
 
But we always got stuck on the same point.  Every week or two Luke would contact us again to tell us about the latest interest rate offers he’d found or received and he wanted to know exactly which loan product and rate we recommended and whether we could “beat” what he had been offered.
 
We explained (many, many times) that:
 
  • The first step was to undertake a detailed and personalised analysis of his situation and match loan products to his goals and objectives;
 
  • We had a guarantee which meant if we couldn’t improve upon the offers he’d already received then it wouldn’t cost him a cent and at least he’d be reassured he did have a good offer in front of him;
 
  • The loan products he was telling us about had vastly different features etc and therefore he was driving himself (and us) crazy by comparing apples to oranges; and
 
  • Almost all of the loan companies he was interacting with were past masters at offering low rates to get new borrowers and then creeping the rates up.
 
Unfortunately, all of this fell on deaf ears – to the point that Luke became abusive and expressed an opinion that, despite us not having sufficient information about his situation and future requirements, “if we couldn’t tell him which loan product we’d recommend then we obviously didn’t know what we were doing”.
 
At that stage – we agreed it would be best if Luke just kept doing things the way he’d always done them (we didn’t share with him Einstein’s definition of insanity – “Doing things the way you’ve always done them but expecting different results.” – but we think someone should).
 
Anyway, a few weeks later Luke made contact again to tell us about the fantastic home loan deal he’d found all by himself (presumably in order to rub our noses in it). 
 
Again, we didn’t waste time sharing this with Luke but the following points were immediately obvious to us:
 
  • The loan product he’d chosen didn’t have the structure or features he’d previously told us were essential;
 
  • We know the modus operandi of the mortgage lender he’d selected – and he will be back doing this same exercise within 12 to 24 months as his rate will be out of step again;
 
  • If Luke had used our service:
 
  • We would have selected a product that had the correct structure and features to meet his goals and objectives;
 
  • We’re confident he would have saved at least $50K in interest over the life of the loan compared to the loan he’d sourced himself; and
 
  • Our initial upfront commission rebate alone would have more than covered the fee for our service.
 
We’ve included this Case Study as an example of an unfortunate lose-lose outcome.
 
Because Luke couldn’t (or wouldn’t) understand that our systems, processes and guarantee mean that our Clients can’t lose he has ended up with an inferior outcome which isn’t suited to his requirements and objectives (his ‘lose’). 
 
We failed to help Luke understand how empowering our service is and missed out on ‘winning’ his business (our ‘lose’).
 
Please don’t let this be you.
 
 
1.  Editor’s Note:
 
One of the many ‘games’ Lenders play is offering very attractive rates to new borrowers but then moving the interest rates on existing loans ‘out of step’ with the RBA’s movements in the cash rate (or simply out of step with the rest of the marketplace). 
 
This means that over the course of two or three years what may have been a very competitive home loan will be 0.5% (or more) out of touch with current competitive rates.
 
This is why we review our Clients situation after 2 years (and then annually as required).  The great news is that if a refinance is warranted there is a new upfront commission rebate available to cover the cost of our service.
 
 
*    The name has been changed but the information is from a factual real life situation.