Banking report fallout: Mark Bouris warns house prices will dive, getting home loan will be tougher

The royal commission’s most controversial recommendation will intensify the plunge in property prices and make it harder for borrowers to get a home loan, Mark Bouris has warned.

The royal commission’s most controversial recommendation will intensify the plunge in property prices by making it harder to get a home loan, one of Australia’s best-known finance faces has warned.

Mark Bouris told News Corp Australia that Commissioner Kenneth Hayne’s plan to make borrowers pay a one-off fee to use a mortgage broker would harm real estate values and kill off the industry. ASX-listed brokers’ share prices nosedived on Tuesday.

Labor has said it backs Commissioner Hayne’s proposed change, while the Coalition has baulked at delivering on it in full. It is the only one of the commission’s 76 recommendations in political dispute.

The royal commission found customers were often in the dark about payments to mortgage brokers, creating the conditions for dodgy conduct.

At the moment lenders pay brokers. CBA has estimated the average fee was $6600 — three times the cost of getting complex financial advice. People who go direct to a bank are not paying a brokerage fee, although bank staff may get a commission for selling a loan.

One in two borrowers use a broker. The royal commission found customers were often in the dark about payments to brokers, creating the conditions for dodgy conduct.

But Mr Bouris — executive chairman of wealth manager Yellow Brick Road, which also acts as a mortgage broker — said there would be damaging consequences for the real estate market if the recommendation became law.

“I’m shocked,” he told News Corp Australia. “It’s going to reduce house prices because people won’t be able to get money.

“You need a broker to get it (a mortgage) over the line.

“All of a sudden people won’t be able to borrow money, you’re looking at a shock in the property market.”

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Mark Bouris says house prices could fall and getting a loan could become much harder.

Under fire National Australia Bank chief Andrew Thorburn said the mortgage broker changes are the “most significant in the whole set of recommendations” by Commissioner Hayne.

Mr Thorburn said while Mr Bouris’ reading of the market could be “technically correct” he agreed with the government’s staged implementation — the gradual removal of broker commissions — as a way to prevent a “dramatic shock”.

“(The government) want to ensure there are no unintended consequences and no reduction in competition,” he said.

Brokers have said bank bosses would be “rubbing their hands together” at the prospect of being able to hit customers with a charge if they go directly to the Big Four to get a loan.

Australian house values have been in a downwards spiral in nearly every capital city recently.

National property prices are now 6.1 per cent lower than they were when the market reached a top in October 2017.

Core Logic data shows Sydney and Melbourne have experienced the weakest conditions.

Amid a furious debate about costs and trust, customers have been urged to do their own research on securing a good loan.

Financial comparison website Mozo’s spokeswoman Kirsty Lamont said the days of getting “free” home loan advice from a mortgage broker were set to end.

“Whether you decide to pay a mortgage broker to help you get a loan or not, it’s always a good idea to start by comparing products through a financial comparison sites,” she said. “Mortgage brokers will be forced to act in your best interests but you’ll have to pay them upfront for the privilege.”

Customers could soon be forced to pay a mortgage broker an upfront fee to use their services.

Home Loan Experts’ managing director Otto Dargan said borrowers would hit roadblocks when trying to get finance, particularly those in more complex financial circumstances.

“If someone can’t buy a home, refinance to a lower rate or fund their business, they suffer and the economy suffers too,” he said.

“Mortgage brokers aren’t just there to get a low rate they are also helping people who are in a difficult situation.”

At the royal commission hearings the Commonwealth Bank’s chief executive Matt Comyn revealed he supported a change to a flat fee to disconnect broker incentives from loan size.

Meanwhile, the Reserve Bank of Australia board met on Tuesday for the first time in 2019 and kept the cash rate on hold at 1.5 per cent.

Despite this, some home loan rates have been rising. Lenders including National Australia, ING and ME have all announced variable interest rate hikes in recent weeks.

In response to Commissioner Hayne’s recommendations, shares in broker Mortgage Choice plunged 25 per cent on Tuesday, while competitor AFG slumped 29 per cent.

All major bank stocks rose between three and seven per cent.

@sophieelsworth