Prices will plunge, brokers warn
THE royal commission’s most controversial recommendation will intensify the plunge in property prices by making it even harder to get a home loan, Australian financial experts have warned.
ASX-listed brokers’ share prices nosedived following the release of the commission’s scathing report this week.
The findings recommended borrowers pay a one-off fee to use a mortgage broker, which experts said could harm property values and kill off the broking industry.
Home Loan Experts’ managing director Otto Dargan said borrowerswould hit roadblocks when trying to get finance, particularly those in more complex financial circumstances.
“If someone can’t buy a home, refinance to a lower rate or fund their business, they suffer and the economy suffers too,” he said.
“Mortgage brokers aren’t just there to get a low rate — they are also helping people who are in a difficult situation.”
Labor has said it will back Commissioner Kenneth Hayne’s proposed change, while the Coalition has baulked at delivering it in full.
It is the only one of the commission’s 76 recommendations in political dispute. At the moment, , lenders py pay brokers. CBA estimates the average fee at $6600 — three times the cost of getting complex financial advice.
People who go direct to a bank are not paying a brokerage fee, although bank staff may get a commission for selling a loan. Half of all Aussie homebuyers use a broker when shopping for a mortgage.
The royal commission found customers were often in the dark about payments to brokers, creating the conditions for dodgy conduct.
One of Australia’s best-known finance faces, Mark Bouris — executive chairman of wealth manager Yellow Brick Road, which also acts as a mortgage broker — said there would be damaging consequences for the property market if the recommendation became law.
“I’m shocked,” he said. “It’s going to reduce house prices because people won’t be able to get money.
“You need a broker to get it (a mortgage) over the line.
“All of a sudden, people won’t be able to borrow money – you’re looking at a shock in the property market.”
Under-fire National Australia Bank chief executive Andrew Thorburn said the mortgage broker changes were the “most significant in the whole set of recommendations”.
Mr Thorburn said while Mr Bouris’s reading of the market could be “techni-techni cally correct”, he agreed with the government’s staged implementation — the gradual removal of broker commissions — as a way to prevent a “shock”.
“The government wants to ensure there are no unintended consequences and no reduction in competition,” Mr Thorburn said.
Brokers have said bank bosses will be “rubbing their hands together” at the prospect of being able to hit customers with a charge if they have to go directly to the “Big Four” to get a loan.
Property values have fallen sharply in nearly every capital city recently.
National property prices are 6.1 per cent lower than at the market’s top in October 2017.
CoreLogic data shows Melbourne and Sydney to be hardest hit by the fall in value.
Amid a furious debate about costs and trust, customers have been urged to do their own research on securing a good loan.
Kirsty Lamont, of financial comparison website Mozo, said the days of getting “free” home loan advice from amortgage broker were set to end.
“It’s always a good idea to start by comparing products,” she said.