Royal Commission Delivers Report – What Now?
The Royal Commission delivered their long awaited report on the banking industry, making numerous recommendations across the finance industry. This included reviewing and proposing overhauls to the mortgage broking sector, without any consultation from broker industry stakeholders
The big question mark is around the recommendation calling for mortgage broker commissions be replaced with a ‘fee for service’ model, even though the government has not indicated it will support this model.
Borrowers have been able to enjoy increased competition when it comes to organising their home loan through the broker channel - largely due to the choice of suitable lender options presented by brokers to clients. This assists in keeping the banks honest and provides borrowers with a number of different options to help identify the right home loan package tailored to their own needs.
If a fee for service model is introduced, it means a much narrower choice for borrowers, as many will just organise their loan with the limited loan choices their existing bank offers to avoid paying the service fee applicable to using a broker. This action of false saving on the part of the borrower effectively removes the options of suitable loan products on offer to them from a variety of other lenders that could in fact be more competitive and better suited to their needs. It also takes borrowers back in time before lenders were forced to abolish ‘deferred establishment fees’ that deterred borrowers from switching home loans because of the cost in doing so.
The fee for service model could effectively remove competition due to borrowers being reluctant to pay for the service mortgage brokers provide, which they currently benefit from at no charge given the chosen lender covers the mortgages broker service fee. Fee for service also effectively negates any potential savings by switching, and places the monopoly back into the hands of the big four banks.
So, if you are happy with your broker and the service they provide, let them know by dropping them a line. A simple email detailing how your have enjoyed the experience and benefitted from their service will help support the current ‘no charge to the borrower’ broking model, keep the big four honest and the home loan industry competitive.
In the interim, the RBA kept rates on hold again and we are still helping borrowers save thousands, so please feel free to call me on 0438 041 111 to organise a confidential discussion and how we may be able to help you get into your new property or home loan.
As always, enjoy life, work hard, play safe and remember that we are always here to help you
‘Take the Confusion Out of Lending’
Peter Vinci - 0438 041 111