MyRate Education Centre

Avoid Being Misled

There are a great many Australian financial sites that let you make comparisons for products such as home loans, as well as sites run by home loan lenders themselves. Whilst the majority of them are very useful and beneficial for researching the home loan options in the market, some other sites use tactics that might end up misleading you. This guide presents some of the types of potentially misleading aspects of these websites and how you can avoid them

Exaggerated claims of independence
Some financial sites (including comparison sites) claim that they are independent. Although sites that list financial products usually do their best to list each product as accurately as they can, they still may have different financial arrangements with the lenders they list. Some sites only list the lenders who have agreed to pay them, which is fine, but then they should not claim to be independent as they do not list all products on offer.

• How to avoid: don't base your decision on comparison sites alone – while they do give a great idea of the products available, it's worth doing some extra research – such as browsing review sites or forums.

Exaggerated guarantees
Some lenders or financial websites claim that they have the lowest rate on the market or that they guarantee to get you a better deal (or the best deal available). These should be taken with caution – given the number of products on the market it's a very tall order for a website to claim to have the "lowest rate" at any point in time. Guarantees of getting a better deal can also be marketing gimmicks and not real guarantees. For instance the terms could simply be that if they do not get you a better deal (under some very specific criteria set out by the website) you are entitled to a cashback. This may be a useful offer but is often marketed as a guarantee. In order to offer a genuine lowest price guarantee, the offer should be able to reasonably explain how come they are able to do this and not simply have a "if you find a better offer..." escape clause.

• How to avoid: don't base your decision on guarantee alone – always read the fine print associated with guarantees and cashbacks to check if it is relevant to you.

Out of date interest rates
When rates change (eg. with Reserve Bank movements), if a lender is listed on a financial comparison site they typically notify the site to have the rate updated when they change their rate. Although it is illegal to advertise an incorrect rate, some lenders may not notify the comparison site. For instance, if all the lender rates go up, by not notifying comparison websites a lender could propel themselves to the top of the tables based on rate. Remember, if a rate looks too good to be true, chances are it's out of date.

• How to avoid: Always double-check on the lender's website and get confirmation from a consultant if you enquire with the lender. That said, some lender sites even list out of date rates so always be sure to ask when you enquire.

Deceptive enquiry forms
Some product comparison sites make it seem like you can enquire about any product, for instance if they have an Enquire button next to each listing. This typically leads you to fill out a form, however often these sites don't have relationships with all the products they list so you may be contacted by someone other than a member of the institution you are interested in. In some cases, this may be a broker or the comparison site itself trying to offer deals with another institution.

• How to avoid: If you enquire about a particular product or institution, any contact you receive should be from that institution or about that product. Beware of calls from other institutions about other products.

Nonexistent lenders
Some mortgage brokers have been advertising themselves as if they were a lender. This is often done by taking the business logo of the broker and attaching it to the rate of the cheapest lender on this broker's panel. When a customer is contacted, often the broker will be offering another product from their panel, so this can sometimes be a form of bait-and-switch advertising.

• How to avoid: If there's a lender with a very competitive rate on a comparison site but when you click to the lender's own site it shows logos of many other financial institutions or states that they can help you choose from many lenders, this website may be a broker passing off as a lender.

Advertising of bait and switch products
Some unscrupulous lenders may advertise products with an extremely low interest rate. When a customer contacts them, the lender/broker encourages the customer to consider an alternative product (with a more realistic rate). The original advertised rate is 'not applicable' for the customers situation, or available only with a hefty fee.

• How to avoid: All lenders are required to advertise a comparison rate along side their interest rate. Always check for the comparison rate to get an indication of hidden fees. Also be on your guard – if a lender tries to steer you towards another, unadvertised product, question why the original advertised rate is not available to you.

Editorial for paid finance products masquerading as "top" or "featured" listings
When returning comparison results, some sites show NOT the best results first, but 'featured' listings instead. These are products which may be paying the comparison site a premium to be listed first, and may not be the best fit for the customer's requirements.

• How to avoid: check the comparison site to see how the results are sorted, and look for an option to turn off featured listings. This should then show you the true results based on your search criteria.