Australia’s largest aggregator, AFG, has called on the banks to be vocal in their support of the mortgage broking sector and to make their responses to ASIC’s remuneration review public.
Last month, ASIC released its scoping discussion paper in regards to its review of mortgage broker remuneration structures to the industry. Speaking to Australian Broker
, AFG managing director Brett McKeon said he hopes the banks follow the lead of AFG and make their response to the scoping discussion paper public.
“I am always concerned about those who yell the loudest quite often get heard the best. Our industry is small, [brokers] are small business operators,” McKeon said.
“There is a certain amount of fragmentation within the industry – some groups don’t have the dollars to invest in representing their members well and others are owned by banks which builds conflict at times with these inquiries and how they respond to them.
“We are going to ask the banks to disclose whether they put a submission in or not on the topic – and I am sure they would have all responded. It would be interesting to see if we can get any of them to be transparent.”
In AFG’s response to the scoping document, which will be made publicly available, AFG has defended commissions, saying any change to the remuneration structure will negatively affect consumer outcomes.
“Most brokers are willing to invest their time and effort helping potential borrowers even if there is no certainty that it will result in a commission. This includes facilitating pre-approval for a buyer who is embarking on the house hunting process or simply helping consumers evaluate their borrowing capacity. If brokers were prohibited from earning commission, this would limit the extent of advice that they were able to give as borrowers are likely to be reluctant to pay upfront fees for advice.
“A viable mortgage broking sector is crucial for retaining an element of competitive pressure in the mortgage market. Many of Australia’s smaller lenders rely on mortgage brokers to act as a distribution network for their products.”
According to AFG’s response, increased competition driven by mortgage brokers has driven down the indicative variable home loan interest rate from around 400bps above the cash rate in 1994 to around 175bps above the cash rate by 2010.
“We certainly hope some of the banks who are dependent on the channel come forward and support us,” McKeon told Australian Broker
“Some of the smaller banks get 80% or 90% of their business from the third party channel so you would hope they would be vocal in their support rather than just be part of an ABA [Australian Banking Association] submission which will largely, I think, try and muddy the waters.”