04 Feb Is it R.I.P. (Royal commission Imposes Punishment) for Mortgage Brokers?
This blog post is a personal view from our Finance Broker, Paul Fox.
Well, it’s certainly been an eventful day in the mortgage broking world. The Royal Commission has made it’s recommendations and both main parties have said they will be implementing them.
The Royal Commission is advocating the removal of trail commissions and then upfront commissions paid by banks. This to be replaced by a fee paid by the consumer. It’s a little early to say what will be fully implemented and the impact to customers and brokers. The immediate industry reaction is that it will be the death of the mortgage broking industry and along with it competition, as borrowers will be unwilling to pay a fee for service and will take the easy option and go direct to a Big Four bank. Independent research showed that 96.5% per cent of customers are not willing to make a payment to a broker of $2,000 and most are unwilling to pay anything at all.
Our own industry body (MFAA) has come out and said “The recommendations on mortgage brokers represent a huge win for the Big Four banks.
Destroying the viability of the mortgage broker channel would immediately reduce competition and drive customers back into the branches of the banks with the largest branch networks.”
The Royal Commission was set up to deal with misconduct in financial services, the main culprits appear to be rewarded with a boost of income as they will no longer pay trail (in 18 months time) and less competition if the recommendations are implemented in full. What is baffling is that it’s the broking industry that takes the brunt of the recommendations not the banks. During the Royal Commission the broking industry which consists of 25,000 small businesses was not called on to give fair representation.
We know that things must change and the industry has a lot to learn from some of the findings (many of these have been implemented), the concern is that these changes in the short term will negatively impact an industry that has grown to provide almost 60% of borrowers with a wider choice of lending solutions and has given thousands of customers financial education and consistent service that they simply do not get from the banks.
Hopefully, common sense will prevail and Australians will not be penalised with less competition that will end up with higher priced mortgages.
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