Royal Banking Commission findings: Mortgage brokers fuming

The mortgage broking industry is fuming they are the biggest scalp of the Royal Commission, as they argue new proposals would hurt competition and leave customers worse off.

The mortgage broking industry is livid they are the biggest scalp of the Royal Commission, with many uncertain if they will survive.

Under Commissioner Kenneth Hayne’s recommendations borrowers would be forced to pay an upfront fee of thousands just to use a broker’s services to try and seek out the most competitive deal.

Mortgage and Finance Association of Australia chief executive Mike Felton said the proposal, which the Government has not committed to in full, would be detrimental to competition and leave customers worse off.

“The large banks must be absolutely rubbing their hands with this outcome,” Mr Felton said.

He warned that it could also deliver a “fatal blow” to the mortgage industry.

Under the changes borrowers will be forced to pay a broker a one-off fee if upfront and trailing commissions being dumped, as Commissioner Hayne suggests.

DAMNING REPORT: A five-minute guide on the Commission’s findings

BAREFOOT INVESTOR: Scott Pape explains banking report

OPINION: Australia’s banks need to do better

MORE: Ten new court judges to deal with banking criminal cases

Mortgage and Finance Association of Australia chief executive officer Mike Felton. Picture: Supplied.

Mr Felton said this could simply result in borrowers taking the potentially easier and cheaper option of getting a banker to sign them up to one of the biggest expenses they will ever take on.

He said the only way to stop this happening was to make sure the banks are forced to charge the same fee as brokers to ensure they are on a level playing field.

“This would reduce competition and reduce customers’ choice,” he said.

Mr Felton said a recent survey into fees and brokers found 96.5 per cent of Australians would be unwilling to pay $2000 or more to engage a broker.

The Finance Brokers Association of Australia’s managing director Peter White slammed Mr Hayne’s idea, labelling him “out of touch.”

Mortgage broekrs are angry at the findings. Picture: Thinkstock

“If a user-pays model was implemented we know that most borrowers wouldn’t pay and banks would make more money and standards would drop further,” Mr White said.

“It’s very disappointing that the Royal Commission wants to destroy some 20,000 small businesses for the monetary gain of the big banks.

“We trust the Government will see clearly on this and continue to work extensively with our industry to improve consumer outcomes.”

Home Loan Experts’ managing director Otto Dargan said the changes will stop customers seeking out hunting out a better deal.

“It’s likely fewer people will refinance their loan if it isn’t competitive,” he said.

“In addition to this people facing financial difficulty may be unable to afford the advice they need and people with a small deposit will need to save even more to get into the market.”

The fee-for-service model is believed to have its origins in the Netherlands.

Originally published as Royal Banking Commission findings: Mortgage brokers fuming