Broker battle heats up
Mortgage broking is under fire but it can still benefit many borrowers, writes Sophie Elsworth
MORTGAGE broking has been the biggest battleground in the fallout from the banking royal commission, prompting some borrowers to wonder if a broker is right for them.
Commissioner Kenneth Hayne’s final report this month recommended that upfront and trailing commissions paid by banks to brokers be phased out. Instead, a one-off upfront fee would be paid by the customer to the broker.
This move has sparked warnings it will kill the industry because homebuyers will refuse to pay thousands of dollars for upfront broker advice.
Lenders are divided over it, but consumer groups backed the changes and have quit a mortgage-broking industry forum, claiming the industry isn’t interested in “doing the right thing” about the reforms.
Mortgage brokers are used by more than half of home loan customers, including Anna Gamble, 50, and her husband, David, 55. They refinanced their five-bedroom home last year after their lender did not give them a lower interest rate.
“We knew from previous experience that finding the right lender is a demanding and time-consuming process,” Mrs Gamble said. “The broker was able to quickly identify a bank which was willing to consider our situation on its merits and this saved us a lot of time in unnecessary run around.”
Home Loan Experts managing director Otto Dargan said using a broker made it easier for customers than “talking to 30 different lenders yourself ”.
“In particular property investors, high net worth borrowers and first-home buyers are more likely to use a mortgage broker as they need more help,” he said. “Most people who don’t use mortgage brokers aren’t as concerned about getting a good rate.”
Financial adviser Scott Haywood said there was value in mortgage brokers for those who were time poor. However, consumers should be aware that brokers do not have access to every lender in the market or all of the cheapest deals.
Four consumer groups – Financial Counselling Australia, CHOICE, Consumer Action Law Centre and Financial Rights Legal Centre – have called on Canberra to back the royal commission recommendations.
Financial Counselling Australia CEO Fiona Guthrie said removing conflicts over commissions was the only way to ensure advice was given with consumers’ best interests in mind. “Buying a home is one of the biggest decisions someone can make,” she said.
Mortgage and Finance Association of Australia CEO Mike Felton said brokers gave customers value. “As credit has been tightened in response to the royal commission, a number of customers are being turned away from their current lenders when looking to refinance,” he said.