A SENSE of uncertainty has swept across local financial brokers and their institutions, as recommendations from the recent historical banking Royal Commission regarding the mortgage broking industry are digested.
After a 14 month investigation, in which more than 130 witnesses were called and over 10,000 public submissions were reviewed, the Honourable Justice Kenneth Hayne, who served as the sole commissioner, submitted 76 separate recommendations to the Governor-General at the start of the month.
The commission was established following revelations of a culture of greed that had spiraled out of control within the financial sector, as well as allegations institutions were involved in money laundering, ignoring statutory reporting responsibilities and turning a blind eye in dealing with terrorism and drug syndicates.
The Royal Commission has recommended mortgage brokers move from a commission-based model to a fee-based model as the review also called for changes to the remuneration structure in the third-party lending channel and reforms to remuneration incentives offered to bankers.
The final report read “the borrower, not the lender, should pay the mortgage broker a fee for acting in connection with home lending” and that “changes in brokers’ remuneration should be made over a period of two or three years, by first prohibiting lenders from paying trail commission to mortgage brokers in respect of new loans, then prohibiting lenders from paying other commissions to mortgage brokers.”
With these recommendations relevant to the mortgage broking industry coming out, Sale broker Kim McMaster is fearful consumers will be left at the mercy of the big banks.
“Demand for brokers has never been higher, with nearly 60 per cent of borrowers using the broker channel and a further 96 per cent of people who have used a broker being either satisfied or very satisfied with the outcome,” Ms McMaster said.
“Mortgage Brokers work for our clients and not for the banks. We operate under the best interests of our clients. We provide choice, transparency, guidance throughout the entire lending process and continue to do so after the loan has settled. We build long term lasting relationships with our clients and work extremely hard to ensure our clients obtain a competitive rate, whilst finding a loan product that best suits their current and future financial and personal needs.
“Destroying the viability of the mortgage broker channel would mmediately reduce competition and drive customers back into the branches of the banks with the largest branch networks. In regional locations like Sale, this would mean that locals would not have the access to other lenders that don’t have a branch footprint and are only available through the broker network. Mortgage brokers are critical in regional and rural areas where alternative banks to the majors are less accessible.
“Without mortgage brokers, finding a home loan will be harder and could become more expensive for home buyers,” Ms McMaster said.
Local financial broker of 24 years Tracey Blore shared similar concerns, but was optimistic the sector could survive provided the powers that be work smartly through whatever problems came up.
Ms Blore points to ASIC’s 2015 financial system inquiry review as evidence corporations are continually looking at areas in which to implement change to positively move forward.
“The industry employs over 27,000 people, it would be an injustice to the customer,” Ms Blore said.
In the aftermath of findings from the Royal Commisson, National Australia Bank CEO Andrew Thorburn and chairman Ken Henry resigned last week.