You may have seen in the news that the banking Royal Commission recently recommended that the cost of using a mortgage broker should be transferred from the banks to the customers.
Now, first things first: it’s business as usual for us.
We’re here to help you and will always do so with your best interests at heart.
However, it’s important to note that if these recommendations are adopted, it would cost customers using a mortgage brokers thousands of extra dollars up-front when buying a home.
On top of this, the imposition of a blanket ban on commissions (starting with the removal of trail commissions from 2020) would significantly lower broker remuneration, kill competition, and drive up the cost of borrowing for millions of Australians.
Mortgage & Finance Association of Australia (MFAA) CEO Mike Felton explains: “The recommendations on brokers represent a massive win for the big banks. The Royal Commission was set up to protect (consumers) from big bank power but has simply entrenched it further”.
“How mortgage brokers can be front and centre of the recommendations is inexplicable. A massive new bank fee added to the cost of buying a home cannot be a good outcome for Australians.”
Reviews by ASIC and the Productivity Commission have found that brokers drive competition by providing a shopfront for smaller lenders.
In fact, mortgage brokers now originate 59.1% of all mortgages in Australia, and more than half a million home buyers use a broker each year.
“I fail to see how decimating the broker channel, leaving Australians with a handful of lenders to choose from, is good for competition, or good for customers,” adds Mr Felton.
Additionally, over the past three decades brokers have contributed to the fall in net interest margin for banks of over 3% points, according to Deloitte. This saves you $300,000 on a $500,000 30-year home loan (based on an interest rate fall from 7% to 4% pa).
– 58% of Australian consumers who intend to use a mortgage broker in future would be unwilling to pay a broker fee of any nature.
– Only 3.5% of consumers would be willing to pay a fee of $2,000 or more.
– A mortgage broker earns on average $86,417 before tax.
As the stats indicate, most mortgage brokers are small businesses that would be crippled by the proposed changes – and it would only be the big banks that profited!
Right now there’s an industry-wide grassroots campaign running for everyday Australians to send a message to the government that they don’t want mortgage broking fees transferred onto them.
Here’s what you can do in four easy steps:
If you’d like any further information on this issue, please don’t hesitate to get in touch. We’d love to discuss it with you!
Disclaimer: The content of this article is general in nature and is presented for informative purposes. It is not intended to constitute financial advice, whether general or personal nor is it intended to imply any recommendation or opinion about a financial product. It does not take into consideration your personal situation and may not be relevant to circumstances. Before taking any action, consider your own particular circumstances and seek professional advice. This content is protected by copyright laws and various other intellectual property laws. It is not to be modified, reproduced or republished without prior written consent.