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Waste not, want not

07 Sep 2005

Finance Week - Joan Muller

'Competition is the only way to stop banks overcharging clients.'

SOUTH Africa is 10 to 15 years behind Britain in terms of mortgaging practices and obtaining the best mortgage deals. 'Many people in Britain are remortgaging every two or three years, switching from one lender to another," says Ian Wason, MD of Bond Busters.

Wason says that South Africans are wasting billions of rand every month in interest overpayment. His new company, formed about a year ago, is offering to check that mortgage holders are getting the best interest rates available and, if necessary, to take over the administrative headache of the remortgaging process at no cost to the homeowner.

'In Britain there are 200 lenders offering up to 3 000 different mortgage products, ranging from capped rates to buy-to-let." says Wason. He says that as people's risk profile changes over time they should qualify for a better rate.

'For example, a newly married couple took out a 100% loan on a R500 000 house five years ago. Now the value of their home has doubled to R1m and they're a much better risk to the bank and the interest rate they're being charged should reflect that.

"If they were paying the prime rate (10,5%) and that was reduced to 9% they could save R500/month, R375 000 compounded over the 20-year term of the mortgage."

Wason says this is a business that every mortgage holder should be aware of. 'It should be a no-brainer to check that you're getting the best rate " it's like a health check-up."

Wason, a chartered accountant who worked for Deloitte the City of London for several years, first came to SA three years ago. 'I saw the tremendous opportunities here," he says. There was a need to demystify mortgages and make people realise that they were commodities like any other product on the market.

'Our number one job is education. That's what all our consultants do: they talk people through their current situation and then negotiate with the banks. We put their mortgage business back into the market " including their existing lender " to get the best rate."

Wason says that people had been brainwashed into thinking they couldn't get out of a mortgage agreement or negotiate a better rate. 'The entire focus of the business is on taking over the administration of people's mortgages and seeing whether it's worth switching to another lender. Though Bond Busters doesn't charge mortgage holders for its services there are, of course, costs involved for the client in the form of mortgage registration and conveyancing fees " but those are dwarfed by savings on the new interest rates."

If banks offer a competitive product they'll grow market share, Wason says. 'Competition is the only way to stop banks overcharging clients when they could be offering them a better rate."

Bond Busters is growing rapidly, he says, with the volume of mortgages it processes doubling quarter-on-quarter. 'We've increased the number of our consultants who deal with clients and negotiate with the banks from three to 12 over the past five months."

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