Members of parliament across the board must act on the Banking Royal Commission’s mortgage broking recommendations according to consumer advocate CHOICE.
“This is a crucial opportunity to fix one of Australia’s most broken financial services” says CHOICE CEO Alan Kirkland.
“Hayne warned us about the influence of conflicted lobbyists – they have a history of stopping great reform. We’ve seen the mortgage broking lobbyists out strongly in the last 24 hours, conflating their self-interest with the public interest to try to stop important changes.”
“Big financial decisions like buying a home are life changing. People go to a broker because finding a mortgage is complex, and they want advice about what’s best for them. As the Royal Commission points out, the system doesn’t guarantee that now.
The Royal Commission’s recommendations present an opportunity for mortgage broking to serve everyday Australians and not big business”
CHOICE has been investigating the mortgage broking industry for years finding that all too often the big banks influence over the mortgage broking sector has led to bad outcomes and higher costs for borrowers.
CHOICE’s research has since been reinforced by ASIC, the Productivity Commission and now the Banking Royal Commission’s final report.
“Commissioner Hayne made it clear that the broking industry requires a complete overhaul – in particular, all commissions for mortgage brokers should be banned. He said this should happen within three years.
“The Government response fails to follow through on this recommendation. Crucially, the Government will allow brokers to continue to receive upfront commissions, paid by banks, which get larger with the size of the loan.”
“This breaks one of Commissioner Hayne’s key rules for fixing the system—which is that conflicted remuneration such as commissions should be banned. The reason he said they should be banned is because they create incentives for brokers to recommend what’s best for the bank, not what’s best for the person seeking a loan.”
Kirkland says the broking industry outrage and PR spin needs to be rejected by Parliament.
“We have seen a furious lobbying campaign by the broker industry over the past 12 months, in response to reports by ASIC and the Productivity Commission that pointed to problems in the broking industry. We can’t let the the Royal Commission report be watered down by lobbyists in its first 24 hours.
“We have to rip the band-aid off mortgage broking,” says Kirkland.
“If we get this right, we’ll have a good mortgage broking industry that works for borrowers, not for the banks.”
CHOICE spokespeople are available for comment.
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