PM warns of ALP hit to housing market in pitch to mortgage brokers

The Morrison government has told mortgage brokers an ALP win will accelerate the property slowdown.

The Prime Minister Scott Morrison on the election campaign in Brisbane earlier this month. Gary Ramage/The Australian

The Morrison government is making a direct election pitch to mortgage brokers, telling them Labor will hit their industry and “accelerate the slowdown” in the housing market.

The letter sent to mortgage brokers, and obtained by The Australian, was signed by Prime Minister Scott Morrison and Treasurer Josh Frydenberg.

“Labor will end trail commissions and hit the mortgage broker industry,” the letter sent earlier this month says.

“Mortgage brokers are critically important for competition and delivering better consumer outcomes in the mortgage market.

“There are 16,000 mortgage brokers across Australia — many of which are small businesses — employing more than 27,000 people. The government wants to see more mortgage brokers — not less.”

The letter comes after both parties softened their stance on mortgage broker commissions following Commissioner Kenneth Hayne’s recommendation they be banned and replaced with a flat fee paid by borrowers. The recommendation was made in the banking royal commission’s final report, released in February.

Mr Hayne was of the view that commissions led to brokers not acting in borrowers’ best interests, while brokers have argued scrapping commissions makes their model unviable.

Mr Frydenberg changed his stance on brokers after intense broker industry lobbying and has more recently said he won’t ban upfront or trail commissions which are paid over the life of the loan but will review pay in the sector in three years.

Labor, which initially said it would implement all the Hayne recommendations in full, then said it would only ban trail commissions. That suggested a higher 1.1 per cent upfront commission would be introduced, calculated on the size of the drawn down portion of a home loan.

Brokers account for almost 60 per cent of home loans written in Australia.

The government is using the difference in policies to take a swipe at Labor and capitalise on broker resentment of a proposed change to their pay. That comes ahead of the federal poll on May 18.

“The Labor Party want to prohibit trail commissions and introduce a fee capped at 1.1 per cent of the value of a loan, which will mean you won’t get properly compensated for the value you add to your clients,” the letter said.

“Labor also proposes to end negative gearing as we know it and increase Capital Gains Tax by 50 per cent. Labor’s housing tax will lower home values, increase rents and accelerate the slowdown in the property market.

“These proposals would have a detrimental impact on mortgage brokers and real estate professionals like yourself and your clients.”

“We are concerned about reports that Labor is refusing to listen to those affected, or those with expertise (such as yourself), who understand the risks.

“Unlike Labor, we support you and your industry.”