In Finance, things are not always what they appear to be. The point made in the recent Productivity Commission report! See this excellent piece from of The New Daily showing NAB’s connectivity and influence across the home loan industry – a classic example of vertical integration and more.
Fans of Married at First Sight and My Kitchen Rules may have noticed over the past few days that popular property website realestate.com.au has started advertising a new product: home loans.
According to the ad, you can now go through the entire process of buying a house – from searching for properties and applying for conditional approval, to actually getting a mortgage – through the website.
This process will no doubt seem extremely convenient to many house hunters. And given the huge popularity of realestate.com.au – it claims to have 6.45 million visitors a month – take-up is likely to be high.
But there is something consumers really need to know about it. Realestate.com.au Home Loans is not an independent initiative. Far from it. It is a deal between Rupert Murdoch’s News Corp, which owns 61.6 per cent of realestate.com.au, and big-four bank NAB.
The first part of the deal with NAB
Last June REA Group, the company behind the realestate.com.au website, signed what it called a “strategic mortgage broking partnership” with NAB. Only now, though, has it started widely marketing this new deal.
So what is the nature of the deal? Well, on the face of it, realestate.com.au appears to be a mortgage broker in its own right. But that is not actually the case.
What REA Group is actually doing is piggy-backing on a mortgage broker called Choice Home Loans. In other words, while the branding may be realestate.com.au, the actual mortgage broking firm is Choice Home Loans.
And who owns Choice Home Loans? NAB does.
The second part of the deal
Another key part of the deal is that house hunters who use realestate.com.au can actually apply for “conditional approval” of a mortgage through the website.
Conditional approval allows you to bid for a property at auction, among other things. It must be provided by a mortgage lender. In this case, that mortgage lender is NAB.
So to re-emphasise the point – if you get conditional approval through realestate.com.au, it will be provided by NAB.
The third part of the deal
However, getting conditional approval with NAB does not commit you to a NAB home loan.
So what happens if you do buy a house through realestate.com.au? Well, you then have to pick a lender. And here you have a choice.
First, you could choose a realestate.com.au ‘white label’ loan. This is a loan that on the face of it looks like it is provided by realestate.com.au.
But once again appearances are deceptive. REA Group does not have a mortgage lenders’ licence. So while these loans may be branded realestate.com.au, they are actually provided by a nationwide mortgage lender called Advantedge.
And who owns Advantedge? NAB does.
If you don’t fancy the realestate.com.au home loan, there are other choices. First, there is a range of NAB mortgages.
And then, there is a list of mortgages from other providers – more than 30 of them, including big names like Westpac, ANZ, Commonwealth Bank, Macquarie, ING, ME, UBank – the list goes on.
Oh, and by the way, that last bank mentioned – UBank – is also owned by NAB.
REA Group assures The New Daily that its (or, to be precise, NAB’s) mortgage brokers do not spruik the realestate.com.au, NAB or UBank loans to their customers at the expense of other loans.
But the rules around this are fairly fuzzy. The Australian Securities and Investment Commission told The New Daily that, while mortgage brokers must not mislead or misrepresent the products they are selling, they also do not have a “duty of care” to their customers.
This means there is a lot more leeway for favouring certain products.
Also, unlike financial advisers, mortgage brokers can and do take commissions from lenders. That’s why you don’t have to pay for their services.
So even if NAB/REA Group don’t sell you a NAB loan, they still get the commission.
None of this is illegal. But the depth of NAB’s involvement in the new service is not made clear on the website. And given NAB is a vested interest, consumers really need to know how deeply involved the bank is before they make one of the biggest financial decisions of their life.