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OUR SOLUTION to the Banks’ Warpath on Living Expenses
November 15, 2018
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February 12, 2019

Choice Matters

The Royal Commission uncovered misconduct and even criminal activity at some of the highest levels in Australian banking.

Yet even though the big banks have been caught out for misconduct, they have in effect, been rewarded by the recommendations made by the Royal Commission.

If these recommendations are implemented in the next 12 to 18 months, we, as mortgage brokers, will no longer be paid commissions by any of the financial institutions.  We will be forced to charge you, our clients for the services you are currently receiving for free.

I started work in this industry 22 years ago and have seen many changes during this time. The commissions we were initially paid were much higher than they are today. The structure was then changed to split the payments into two parts, the first a smaller upfront payment, paid after settlement of the loan, and the second, a trail commission, paid for continued client service for the life of the loan.

Should the loan be refinanced within the first two years, all or half of the upfront commission is clawed back by the funder.

As such, our entire remuneration is entirely dependent on the successful and continued outcome for you, our client.

Our policy has always been to act in your best interests in helping you achieve your goals and it has continued to be the case after the settlement of your loan.

We have always been available to answer any ongoing questions you have. We have always advocated regular reviews to ensure that you are always in the best possible position with your home loans, particularly for those of you with property portfolios.

We regularly keep you up to date with newsletters and blogs to keep you well informed as to what is happening in the industry.

I have always made a point of stating at our very first meeting that we work for you and not the banks, and this will never change.

Looking at the broader picture:

The mortgage broking industry was originally introduced to provide true competition to Australia’s lending landscape and to this end, has delivered significantly better outcomes for consumers including lower interest and a much higher focus on your experience as a client.

Mortgage brokers are currently responsible for almost 60% of mortgages. This volume could never have been achieved without a high level of customer satisfaction and trust.

If the recommendations of the Royal Commission are implemented, I strongly believe that customers will end up paying more.

For example, if you are unable to pay the fee, you may end up with a loan that is no longer serving your best interests.

If you can afford the fee, you will be forced to absorb the costs that the banks are currently responsible for.

To keep an even playing field, the banks have stated that they will also charge customers a fee for service.  Add these fees to the commissions they will no longer be paying mortgage brokers and it is estimated to add billions of dollars back into their coffers. One could be forgiven if you saw this as double dipping.

The real losers if this happens will be you the clients.

A significant number of mortgage brokers will also be forced to leave the industry, creating unemployment for not only them but for the tens of thousands who work in support of the finance industry. These include but not limited to Mortgage Aggregation service providers, Professional Association bodies and IT services.

And the winners will be the Big 4 Banks….. and their shareholders of course.

As soon as the recommendations of the Royal Commission was announced, the banks’ share values immediately rose, giving them an instant windfall:

None of this makes any sense on any level.

To sum up, the recommendations will have a negative impact on all of us, those of you with existing mortgages, those of you needing mortgages in the future, and us in the finance industry.

The formula is a simple one:

Less competition = Less Choice + Higher Costs + Higher Interest Rates + Less Service

I urge you to join us and take some action to help stop this insanity by having your voice heard by signing either or both petitions (via the links below), calling for politicians to ignore the Royal Commission recommendations:

As always, we are here for you, serving your best interests.

Thank you in advance for your help to protect competition.

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