Higher interest rates, increased fees, less flexibility, more loans declined and fewer options. That's how borrowers will lose out if the banking Royal Commission's recommendations around how mortgage brokers are paid are implemented.‍

You may have seen in the news that the banking Royal Commission recently recommended that the cost of using a mortgage broker should be transferred from the banks to the customers.

Now, first things first: it’s business as usual for us. We're here to help you, we are not charging a fee for our service and as always,  have our customer's best interests at heart.

However, it's important to note that if the Royal Commission recommendations are adopted, it would cost customers using a mortgage broker thousands of extra dollars up-front when getting a home loan. More than 60% of Australian's surveyed have indicated that they would not be prepared to pay this cost, meaning the majority of Brokers would go out of business, leaving customers at the mercy of the big banks. This outcome would kill competition in the home loan market and drive up the cost of borrowing for millions of Australians. The only winner being the major banks.

Mortgage & Finance Association of Australia (MFAA) CEO Mike Felton explains: “The recommendations on brokers represent a massive win for the big banks. The Royal Commission was set up to protect consumers from big bank power but has simply entrenched it further”. “How mortgage brokers can be front and centre of the recommendations is inexplicable. A massive new bank fee added to the cost of buying a home cannot be a good outcome for Australians.”

As well as the additional costs in fees and interest rates, many Australians will have difficulty getting a loan because they don't fit standard lending criteria or meet the big banks affordability criteria. Mortgage Brokers help clients find a loan and lender that suits their specific circumstances. Each lender has a set criteria that a borrower must meet for their different loans and they all have varying affordability testing. Without an experienced Mortgage Broker to guide consumers in the direction of the loans and lenders that are best suited to them, the risk of having loan applications declined will increase significantly.

The stats

Reviews by ASIC and the Productivity Commission have found that brokers drive competition by providing a shopfront for smaller lenders. In fact, mortgage brokers now originate 59.1% of all mortgages in Australia, and more than half a million home buyers use a broker each year. “I fail to see how decimating the broker channel, leaving Australians with a handful of lenders to choose from, is good for competition, or good for customers,” adds Mr Felton. Additionally, over the past three decades brokers have contributed to the fall in net interest margin for banks of over 3% points, according to Deloitte. This saves you $300,000 on a $500,000 30-year home loan (based on an interest rate fall from 7% to 4% pa).

Here are some other interesting stats from the Deloitte Access Economics report and independent research released last month from a survey of 5,800 Australian broker and bank customers:

- 58% of Australian consumers who intend to use a mortgage broker in future would be unwilling to pay a broker fee of any nature.- Only 3.5% of consumers would be willing to pay a fee of $2,000 or more.

- A mortgage broker earns on average $86,417 before tax.As the stats indicate, most mortgage brokers are small businesses that would be crippled by the proposed changes - and it would only be the big banks that profited!

How you can help us to continue to support you

Right now there's an industry-wide, grassroots campaign running for everyday Australians to send a message to the government that they don't want mortgage broking fees transferred onto them. Here's what you can do in four easy steps:

‍1. Take action with your local politician: Contact your Federal MP and let them know how you feel by visiting this site. It takes just a couple of minutes as there's a pre-populated letter already filled out for you (you can edit it as well).

‍2. Get others involved: Talk to your family, friends and your customers and ask them to go to the site and contact their Federal MP as well.

‍3. Sign and share the petition: There is also a petition available at www.brokerbehindyou.com.au – please sign and share the petition to ensure policy makers understand the weight of support behind the channel.

‍4. Share the campaign: Additional campaign advertising collateral will be made available on the website for you to share and promote on your social media platforms daily over the next few weeks and beyond.

If you’d like any further information on this issue, please don’t hesitate to get in touch. We'd love to discuss it with you!

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‍Disclaimer: The content of this article is general in nature and is presented for informative purposes. It is not intended to constitute financial advice, whether general or personal nor is it intended to imply any recommendation or opinion about a financial product. It does not take into consideration your personal situation and may not be relevant to circumstances. Before taking any action, consider your own particular circumstances and seek professional advice. This content is protected by copyright laws and various other intellectual property laws. It is not to be modified, reproduced or republished without prior written consent.