The Royal Commission into the Banking & Finance Industry has been conducted, with the Final Report made public last week. The recommendations of Hayne’s report, if implemented will have devastating effects, not only on the mortgage broker industry, but will not bode well for the economy in general.
One of the recommendations of the Royal Commission proposes a customer pays fee-for-service model for all home lending customers and the abolishment of trail commission. This would see customers forced to pay thousands of dollars to access a broker. Currently mortgage brokers receive a small upfront commission of anywhere between 0.5% - 1% and an ongoing trail commission, paid monthly of around 0.15%- 0.3% per annum of the loan amount. All of which has been outlined in the Credit Proposal Disclosure, given to the customer after initial interview process. These amounts are paid directly to the broker by the finance company. It allows the broker to offer a product that fits the customer’s requirements and profile at the best possible rate.
The proposed model will see the customer forced back to dealing direct with lending institutions which will likely put margin straight back into the banks coffers.
Did you know:
Mortgage brokers currently facilitate 60% of the home loans written nationally and more than half a million Australians utilise mortgage broking services annually.
Mortgage brokers provide an alternative to the big banks allowing consumers to access smaller banks and non-bank lenders. They are a critical service for regional and rural areas where retail banking networks are less accessible.
Mortgage brokers drive competition and provide choice, keeping lenders interest rates and fees low.
Mortgage brokers provide an ongoing and more personable service to customers beyond the settlement of their loan.
Mortgage brokers attend regular seminars and training, ensuring they are across all types of products.
Mortgage brokers, help borrowers to access credit – especially customers with complex lending scenarios and those in rural and real Australia.
Without mortgage brokers, there will be less competition in the industry and the major lenders will again hold a monopoly on the home loan market. It will dramatically reduce the viability of smaller lenders as many rely solely on mortgage brokers support of their businesses. This will ultimately result in the big banks gauging customers through increased interest rates and fees. Increased interest rate margins will only increase the profits of the big banks!
The important competitive impact brokers have delivered has been acknowledged in recent reviews of the mortgage broking industry by ASIC, the Productivity Commission and the Australian Banking Association (ABA). Treasury also noted in its submission to the Royal Commission Interim Report that:
“If mortgage broking activity diminishes, this could have a significant detrimental impact on competition in the mortgage market. The potential beneficiaries of any lessening of competition would be the major banks with established branch networks”.
The proposed changes would decimate the 17,000 small businesses that operate in the mortgage broking industry with the potential to leave up to 27,000 employees jobless. They will cut access to small and non-bank lenders and hand the power back to the big banks forcing customers back to the branches.
The destruction of competition will limit customer choice and further limit access to credit – particularly for low income, complex borrowers and those in rural and regional areas.
We are asking you, our valued clients to get behind our industry and 17,000 small businesses to ensure the mortgage broker channel remains strong.
Please show your support and be a voice for small business by signing our online petition to keep choice alive at www.brokerbehindyou.com.au