Of the 76 recommendations made from the Royal Commission report into the financial services sector, 9 had a direct impact on mortgage brokers.
But now, with the immediate media frenzy of the Royal Commission behind us, what does that really mean for the future?
Currently, the recommendations made are just that – recommendations.
Just a few weeks ago, the The Morrison government, under pressure from the powerful collective of mortgage brokers unhappy with the findings, did a back-flip on one key recommendation from the Hayne Royal Commission – something that means good news for mortgage industry professionals. The original recommendation – that trailing commissions will be banned from 2020 – is no longer in place.
Key Announcement for Australian Mortgage Broking Industry
Th]is important decision was announced by the treasurer, Mr Josh Frydenberg, who told media at the time that the government had agreed not to stop trail commissions on new loans – something that will be reviewed in the future.
The future review will be overseen by the Council of Financial Regulators and the Australian Competition and Consumer Commission.
In what was seen as a pre-election tactic to win back the confidence of the influential mortgage broking industry, Mr Frydenberg announced that the government had changed it mind because of concern for the impact competition in the property lending market could have on the economy.
The announcement was a welcome show of support for the industry and enabled those working professionally in the dynamic sector to breathe a sigh of relief.
Mr Frydenberg did confirm that a future investigation into this latest decision would come after “the introduction of a number of new measures that the government has already announced”. These regulations include the imposition of a legal obligation for mortgage brokers to have the best interests of consumers at their core, as well as a new requirement that the value of commissions paid up-front be connected to the amount borrowers draw down on their mortgage. There is also a ban on commissions linked to volume-based and campaign deals, plus a limit of two years on claw-back, which will come into play from the start of the new financial year on July 1, 2020.
Protecting a Professional Lending Industry
With around 16,000 mortgage brokers in Australia, Mr Frydenberg’s announcement recognised the value of small business operators in our community – and the more than 27,000 employees those mortgage broking businesses sustain.
The flip-flop is a big win for an important Australian industry and we look forward to continued checks and reviews to ensure the sector maintains ethical behaviour that looks after the lending needs of all Australians seeking an entry point to the property market.
To find out more about how a loan broker can help you put your financial goals in place, contact our Lending Specialist’s team today.