has urged the government to act on recommendations to improve transparency in the mortgage broking industry, as major banks are “increasingly taking control of the broker-originated home loan”.
In its submission to the Final Report of the Financial System Inquiry (FSI), Suncorp
argues that greater transparency and pre-sale disclosure be introduced to ensure consumers understand the level of independence, or otherwise, when using mortgage brokers.
“The premise of a mortgage broker is that a consumer can receive an objective and independent assessment of what is the best housing loan available for their needs,” the submission states.
“It should be recognised that consumers utilise mortgage brokers in order to receive personal, independent advice and as such, brokering advice should be clear and transparent as to incentive structures and product and adviser salesforce ownership.”
This is becoming more urgent as the ownership and distribution of banking products is becoming increasingly concentrated, according to the non-major.
“At question is the transparency of the ownership structures behind the products, mortgage broking networks and aggregator platforms and the incentive schemes driving sales. About 50% of Australia’s mortgage customers are seeking impartial advice on the best product for them from aggregator groups.
“In the past six years the major banks have acquired regional bank brands and are increasingly taking control of the broker-originated home loan market through their acquisition of aggregator businesses.”
The non-major also added that even if a broker is impartial as to the volume of loans directed to competing banks, the broker can reward their owner bank by directing a higher proportion of quality loans, i.e. those with LVRs less than 80%.
“These models have implications for consumers seeking independent information on the best mortgage for them. Customers may be unaware that advice and commission structures are tied to specific providers and there is also little transparency about the product provider relationship in many cases," the submission stated.