The industry is calling upon the federal government to initiate consultation with mortgage brokers before any reforms to remuneration are made.
The royal commission made the controversial call for mortgage brokers remuneration to move away from a lender-paid commission to a consumer-paid fee and for a ban on trail commissions.
The industry responded by rallying around brokers with many arguing that the recommendation would end competition in the industry and potentially the industry itself.
Mortgage Choice’s chief executive officer Susan Mitchell said the industry had had its entire world changed without any consultation.
“There is no right of reply to the banking royal commission’s recommendations and the industry has significant concerns about the impact on consumers and competition if the changes are implemented without industry discussion,” she said.
Commissioner Hayne also recommended a Treasury-led group should determine what fee lenders would be required to charge but Ms Mitchell said that was fraught with issues.
“Currently, if all of the commission’s recommendations are adopted, the banks will be given the green light to charge a multithousand dollar fee to borrowers to secure a home loan product.
“This will hit borrowers hard, after they’ve saved for years for a deposit totalling tens of thousands of dollars. Further, the unintended consequence of handing back power to the banks is a possible steady increase in interest rates,” she said.
Ms Mitchell said the ramifications on the industry would also see homeowners struggle to afford a home.
“Adding more costs in the form of an upfront fee paid regardless of whether the customer goes to a broker, or directly to a lender, cannot possibly be a good outcome for consumers.
These changes will result in poor consumer outcomes, which is not in line with the original intentions of the banking royal commission,” said Ms Mitchell.
Ms Mitchell said she was relieved to hear that Prime Minister Scott Morrison would absorb the commission’s recommendations over time but she hoped that would involved consultation with the industry itself.
“It is understandable that the Australian public want to see significant change in banking practices following the evidence given at the banking royal commission hearings but the mortgage broker channel, which is both successful and popular with borrowers, is bearing the brunt,” she said.
Ms Mitchell said she hoped common sense prevails and that any changes to the industry would create a level playing field for lenders and brokers.
“I believe this can best be achieved through consultation with the mortgage broking industry. Australian borrowers deserve nothing less.”
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