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The Issue / Background

The Royal Commission into Misconduct within the Banking, Superannuation and Finance Industry released its final report on Monday, 4 February, 2019. The report revealed misconduct and even criminal activity at some of the highest levels of Australian banking, and yet the same report recommends squashing the mortgage broking channel by abolishing broker commissions and replacing broker remuneration with an upfront fee paid by the borrower to the broker. This would essentially kill the broker channel and force borrowers to the big banks – the very banks guilty of misconduct and criminal activity. The report’s proposed reform has baffled the industry, along with many consumers, media and government. Both ASIC and the Productivity Commission have previously held enquiries and found the current system for broker remuneration should not be changed. The Royal Commission’s proposed alternative is to have the customer pay a new fee of thousands of dollars upfront, every time they access a broker or go to a bank branch seeking information and advice for a home loan. A recent customer survey reveals 96% of consumers stated they will not pay upfront fees, and instead prefer brokers earning commissions that have been fully disclosed.

The Implications

If the Royal Commission’s recommendations regarding the mortgage broking industry are adopted, it will be to the detriment of home loan customers, brokers and the economy.

  • To Borrowers
  • To Brokers
  • To the Economy
  • Less competitive pressure on the banks will give the freedom to raise rates and make borrowers pay more for home loans.
  • Less choice and limited access to a broader pool of small bank and non-bank lenders will restrict options for many Australians.
  • Higher home loan rates may deter or delay property investors from entering the market and home buyers from borrowing.
  • The proposed reforms will reduce the average broker salary to around $40,000 per annum, making their career unsustainable.
  • The mortgage broking industry creates more than 2700 full-time equivalent jobs through 20,000 small businesses. As mortgage brokers are forced to seek other careers with sustainable salaries, shopfronts will be vacated, support staff will be laid off and brokers’ families will be placed under financial pressure.
  • The flow-on impact to other industries and the communities will be felt.

Take Action

Join us in voicing concerns over the proposed changes to the broking industry. Help us stop these misguided recommendations from burning borrowers, brokers and hurting the economy.