Bottom line of the Royal Commission’s recommendations can be summarised by the share price movements in yesterday’s market, with bank shares surging ahead 5%. Westpac’s share price soured to the biggest one-day-gain in a decade! These immediate movements indicate how lightly the banks got off considering their misconducts that came to light during the commission’s inquiries.
Over the last 20+ years Australians have shown their support of mortgage brokers as they provide choice, trust and most importantly allow for competition in the market place. With a dominant market share of now 59%, it’s clear who the public trust and choose to do their mortgages.
Mortgage Brokers Remuneration
Within the past 2 years various regulatory bodies have reviewed broker commission models and the outcome was consistently; the current model is acceptable and works. This includes reviews undertaken by the Productivity Commission, ASIC and APRA.
Each of these independent reports concluded that broker’s total remuneration is fair. Additionally and most importantly they recognised brokers bring competition to the home loan market. Reducing broker remuneration will reduce broker numbers and therefore create a smaller platform for all the medium sized and smaller lenders who don’t have the branch infrastructure of the big banks to compete – hence the surge in major bank shares price yesterday.
Research complete by the Royal Commission into Brokers
It has to be asked, where was the intense research done into the Mortgage Broking industry by The Commission? The Commission’s insight and research into the mortgage broking industry was conducted via questions to Aussie Home Loans (100% owned by CBA) and questions posed to Matt Comyn (CEO CBA).
This is comparable to the government setting up a task force to assess the long- term health risk of e-cigarettes with all inquiries being directed exclusively to various CEO’s of tobacco companies…no guess whose interests would be at heart!
What this change means
The changes proposed to the broking industry will reduce the number of mortgage brokers that can afford to continue in business. This will result in reduced competition from smaller lenders. Reduced competition directly favours the Big4 Banks that will fight tooth and nail to protect their branch distribution channel.
The Big4 Banks would love to go back to a time where the only place you could source a home loan is via one of their branches; a time where they could set their interest rate margins to whatever they wanted as there was no competition from smaller lenders to force downward pressure on interest rates. I can’t understand how this can be seen to be a positive outcome for borrowers.
Way Forward for Professional Partners
Every day the sun rises, and people still buy homes, investment properties and need finance for various reasons. We’re here to serve you, guide you and provide top class advice. That’s what mortgage brokers do!
If you or your friends want your loan reviewed or advice about buying home or investment property or loan structuring or competitiveness please contact us as its business as usual!