Frydenberg gives a reprieve for mortgage brokers on trailing commissions ban

The Treasurer has given mortgage brokers respite on a plan to ban trailing commissions by 2020, opting for a 2022 review instead.

Treasurer Josh Frydenberg said the change of plan was because the government wants keep competition in the mortgage market, amid concerns that only the largest banks could afford to pay steeper bonuses to brokers. Picture: Aaron Francis/The Australian

Josh Frydenberg has walked away from his plan to ban mortgage broker trailing commissions, pushing the issue to a review in 2022.

The Treasurer said the government had backflipped on its crackdown on the industry because it wanted to keep competition in the mortgage market, amid concerns that only the largest banks could afford to pay steeper bonuses to brokers.

The issue will be reviewed in three years if the Coalition remains in power by the Australian Competition and Consumer Commission and the Council of Federal Financial Relations.

“So the abolition of trailing commissions from July 2020 won’t proceed as first announced. The reason is, we’re concerned about the impact on competition in the mortgage lending market,” Mr Frydenberg said.

“Small lenders and mortgage brokers are absolutely critical part of competition in that market.”

Labor has vowed to ban trailing commissions, which are fees paid to brokers on an annual basis over the lifetime of a mortgage repayment.

The government’s decision is against the recommendations of the Hayne royal commission.

Aussie Home Loans chief executive, James Symond said the move was a positive step by the Treasurer.

He said the recommendations made by the Royal Commission to move to a consumer pays broker model and scrap commissions could hurt the mortgage broking industry, as well as the customers it supports. Aussie is owned by Commonwealth Bank, although the lender is in the process of spinning off the business.

“We believe the current commission structure provides the right outcome for our customers, while preserving competition in home lending and our thriving mortgage broking industry”, added Mr Symond.