Qualifications for mortgage brokers and a higher media profile for their professional body should help combat the bad press being attracted by some financial operators.
The Mortgage Brokers Association is warning homeowners to be careful of approaches by companies specifically set up to 'help reduce your mortgage'. The call echoes recent warnings from the Consumer's Institute (see last week's story) and a caution by the Ministry of Consumer Affairs, which noted its concerns on TV One's Fair Go about some mortgage reduction companies' pressure sales tactics and high fees.
MBA Chairman Rob Tucker told Good Returnsthat these firms were causing a series of complaints to the association, even though they weren't actually members.
"They generally don't understand lending, mortgages, or the ramifications of what they're selling," Tucker said.
"In our association's experience, the skills of salespeople employed by mortgage reduction companies are simply not at an acceptable level."
In order to lift its own game, the Mortgage Brokers Association is about to announce a university-affiliated training programme for members. Increased promotion of what the association stands for and what the public should consider when engaging a mortgage specialist is also on the cards.
Tucker said that mortgage reduction companies were charging large fees and using pressure and incentive sales techniques to sign up mortgage holders. They apparently didn't consider the personal situation of their clients, as they often targetted people on low incomes with 'negligible' ability to save.
However, he conceded that these firms had raised the profile of how people could use their mortgages more effectively.
"Some companies offer a monitoring service. There's probably value in that and it probably justifies the charge."
"But we take issue with the amount of the charges and with the high pressure sales."
Before considering any mortgage reduction programme, Tucker says:
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Make sure you're suited to such a programme in the first place. It won't help much if you already spend all or most of what you earn , or you don't have good personal discipline and a reasonable income level.
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Using revolving credit products to reduce your overall mortgage costs works well in theory. However, it can be very tempting to have ready access to extra funds.
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Check out the costs of refinancing or restructuring your mortgage, as these can largely offset any savings you might make. If you're on a fixed rate loan, there could be high penalties for breaking this.
