And the big banks get a free kick out of it
We speak to an expert on the process of making the recommended changes
- 2018 Commercial Lenders Roundtable
- Top 10 Brokerages 2018
- 2018 Brokers on Aggregators
by Rebecca Pike
As the dust begins to settle and the industry now knows what it will have to deal with post-Royal Commission, groups are beginning to campaign in defence of the mortgage broker industry.
This morning, the MFAA announced it was working with a number of industry partners in a national advertising campaign. As of today, brokers can provide their clients with a link, where they can search for and write to their MPs.
CEO of the MFAA Mike Felton said the changes to remuneration, starting with the ban on trail commission in 2020, will have a “devastating effect” on the industry, kill competition and drive up the cost of borrowing.
He said consumers can feel rightly disappointed by the outcome of the Royal Commission, with recommendations affecting brokers giving power back to the big banks.
Brokers front and centre
Voicing concerns echoed by many at this time, Felton questioned how brokers have come out of the final report so badly, when the Royal Commission was called in response to the behaviour of the banks.
“The Royal Commission was set up to protect them from big bank power but has simply entrenched it further,” Felton said.
“How mortgage brokers can be front and centre of the recommendations is inexplicable to me. A massive new bank fee added to the cost of buying a home cannot be a good outcome for Australians.”
The broker role
Another common theme running throughout the reaction after Monday’s final report release, is the fear of what changes to the broking industry will do to competition. Many brokers have already said they will have to consider leaving the industry if their income goes down and there is a concern borrowers just won’t want to pay the upfront fee.
Without the strong broker industry many banks and lenders will not have a distribution channel strong enough to compete with the larger players.
Felton said, “As reviews by ASIC, the ABA and the Productivity Commission have found, brokers drive competition by providing a shopfront for smaller lenders, particularly for rural and regional customers. We are critical to the health of Australia’s mortgage lending market.”
Recent data from the MFAA showed that the broker market share was now at a record high of 59.1% and Felton said much of the growth in market share came from small and regional lenders who are now able to compete with the big four.
“Brokers are critical to competition in home lending,” he said. “As such, the MFAA is leading a campaign to call attention to this issue and help Australians understand that low interest rates, competition and the services they receive from brokers for just under six out of every ten new home loans are under threat.
“We have launched a national advertising campaign this week, and we are calling on everyday Australians to join us in a grassroots campaign to protect competition by letting their local representatives know they support the broker channel.”
Brokers can share this link with their customers, where they will be able to enter their postcode and contact their federal MP: www.brokerbehindyou.com.au
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