Where mortgage broker leads come from, and what it means for you

Most people meet a mortgage broker one of two ways. Someone recommends one, or one contacts them shortly after they filled in a form online. The first is obvious. The second is worth understanding, because it involves a whole industry that borrowers rarely see and brokers rarely explain.

The four ways brokers find clients

Every broker uses some mix of these, and the mix says quite a lot about how established they are.

• Referrals. Past clients, accountants, financial advisers, buyers agents and real estate agents. The cheapest source and the highest converting, but it grows slowly and it takes years to build.
• Repeat and database. Clients coming back to refinance or buy again. A mature broker lives on this. A new one has none of it.
• Their own marketing. A website, search advertising, social media, seminars. The broker owns the channel but carries the cost and the learning curve.
• Bought leads. Enquiries generated by someone else and sold on. Fast to switch on, and the reason a broker sometimes calls you within minutes.

What a bought lead actually is

You searched for something, landed on a page, and filled in a short form. That form belonged to a lead generation business rather than to a broker. The business verifies the enquiry, checks it is real, and passes it to a broker who has agreed to buy enquiries of that type. Services such as PrimeLeads operate this way, selling verified enquiries to brokers at an agreed price per lead rather than as a monthly retainer.

Leads are sold two ways, and the difference matters more to the broker than to you. An exclusive lead goes to one broker only. A shared lead is sold to several, which is why some people find themselves fielding four calls about the same enquiry. If that has happened to you, the enquiry was almost certainly shared.

Does it cost you anything

No, and this is the part worth being clear about. Broker commission is paid by the lender, not by you, and it does not increase because the broker paid to reach you. Whatever a lead cost comes out of the broker's own margin.

What it does affect is the broker's incentive to move quickly. Someone who has paid for your details has a direct financial reason to call you fast and to keep following up. That urgency is usually helpful. It becomes a problem only if it turns into pressure to settle before you are ready.

Where the rules sit

Buying and selling enquiries is legal in Australia, subject to two pieces of legislation that exist to protect you.

The Privacy Act 1988 and the Australian Privacy Principles govern how the details you enter can be used and disclosed. In practice this means the form you filled in should have told you your information could be passed to a broker or lender. The Spam Act 2003, administered by ACMA, requires consent, clear sender identification, and a working unsubscribe facility on commercial electronic messages, which must be actioned within five working days.

A legitimate operator can tell you exactly which page your enquiry came from and when you submitted it. One that cannot, or will not, is the one to be careful with.

What to ask if a broker contacts you

• Where did you get my details? A real answer names a site and a date.
• How many lenders are you accredited with? This tells you far more about the quality of the advice than how they found you does.
• Will you show me the comparison? You are entitled to see why a particular lender was recommended over the others.
• Are you a member of the MFAA or FBAA? Membership brings a code of practice and a complaints path.

Notice that only the first of those is about lead generation. How a broker found you says very little about whether they are any good. It is worth understanding so that nothing surprises you, and then it is worth setting aside in favour of the questions that actually affect your loan.

The short version

A broker paying to reach you is not a warning sign, and it costs you nothing. Being contacted by four brokers at once means your enquiry was sold as a shared lead, which is worth knowing before you assume you are in demand. And if you would rather not be contacted at all, asking to be removed is a request that has to be honoured.

Common questions