February 15, 2019
Mortgage Choice Chief Executive Officer, Susan Mitchell, is calling upon the Federal Treasurer to initiate consultation with the mortgage broking industry, regarding the recommendations in Commissioner Hayne’s final report, before any reforms to remuneration are made.
Ms Mitchell said the broking industry has just had its entire world changed without any consultation.
“There is no right of reply to the Banking Royal Commission’s recommendations and the industry has significant concerns about the impact on consumers and competition if the changes are implemented without industry discussion.
In his final report, Hayne recommended the borrower, not the lender, should pay mortgage brokers a fee for acting in connection with home lending. The Commissioner also recommended that a Treasury-led working group should be established to determine what fee that lenders should be required to charge to achieve a level playing field.
“Currently, if all of the Commission’s recommendations are adopted, the banks will be given the green light to charge a multi-thousand dollar fee to borrowers to secure a home loan product. This will hit borrowers hard, after they’ve saved for years for a deposit totalling tens of thousands of dollars. Further, the unintended consequence of handing back power to the banks is a possible steady increase in interest rates,” said Ms Mitchell.
Highlighting the plight of Mortgage Choice customers, Ms Mitchell said it’s tough enough as it is for Australians to afford a home.
“Adding more costs in the form of an upfront fee paid regardless of whether the customer goes to a broker, or directly to a lender, cannot possibly be a good outcome for consumers.
“Fees could also prove to be a disincentive for refinancing and switching to a better financial product if the interest savings don’t offset the switching costs.
“These changes will result in poor consumer outcomes, which is not in line with the original intentions of the Banking Royal Commission,” said Ms Mitchell.
Ms Mitchell’s call for consultation with the mortgage broking industry follows the Treasurer’s announcement that the removal of trail commission on new lending will be effective from 1 July 2020.
“It was a relief to hear Prime Minister Scott Morrison say earlier this week that the Commission's recommendations could be absorbed over time, as long as that was done in consultation with the industry,” said Ms Mitchell.
Ms Mitchell, whose Company also has a financial advice arm, Mortgage Choice Financial Planning, said the broking industry would potentially undergo a massive contraction without any consultation, whereas the financial advice industry was consulted for over a period of years before FOFA was introduced.
The lack of clarity on broker remuneration is today creating unnecessary stress for the mortgage industry, which employs 27,000 Australians in small businesses across the country.
“I’m calling for confirmation from both sides of government that a consultation process will be instigated. This will at least give the broking industry comfort that our point of view will be heard,” said Ms Mitchell.
“It is understandable that the Australian public want to see significant change in banking practices following the evidence given at the Banking Royal Commission hearings but the mortgage broker channel, which is both successful and popular with borrowers, is bearing the brunt. The same can be said for the smaller lenders that do not have a branch network, for whom brokers provide a shopfront.
“Looking ahead, I hope common sense prevails and the industry and both sides of federal politics can all work towards a level playing field for lenders and brokers. I believe this can best be achieved through consultation with the mortgage broking industry. Australian borrowers deserve nothing less,” concluded Ms Mitchell.