A new “reverse” mortgage has been launched where financial planners and accountants build their own home loan packages instead of picking from a range of pre-prepared products. The system is designed to help advisers compete with banks in offering a one-stop financial package.
Mortgageport is the latest foray into traditional bank territory by Glen Spratt, one of the founders of Wizard, the company which helped wrestle away the banks’ stranglehold on the home loans sector in the early ’90s.
“We have turned the system upside down so that the financial planner asks clients what they need in a mortgage,” Spratt says. “We see it as a joint venture where the financial planner designs the product and then outsources the ongoing management to us.”
The package has two main product streams, each with about 20 individual features which can be snapped on or omitted according to the client’s needs.
Spratt describes the first stream as the “basic, cheap, home loan” while the second is “fully featured” with options including credit lines with cheque books or credit cards, the ability to convert to a fixed interest rate, multiple redraw capabilities, interest-only loans, a pre-paid interest option and direct salary payments. The client can also opt for part-fixed, part variable interest rates.
Mortgageport buys the loan at the wholesale rate of 5.6 per cent and then it is up to the adviser to build their own profit margins on top, which Spratt expects to be around 0.4 to 0.6 per cent. The adviser can also sell the loan back to Mortgageport.
Spratt says he has already struck a deal with Professional Investment Services, which has around 200 accountants and advisers, following a four-month product trial with Barnes Dowell James, where “a couple of dozen” home loans were sold.
“The financial planner speaks to the borrower first and outlines the requirements.
We then speak to the borrower and help decide what’s right. We issue the paperwork which is finally okayed by the adviser. There are no ongoing management fees for the client,” Spratt says.
Advisers take on the banks page 12
