A non-major bank has announced a change to its upfront commission structure for mortgage brokers ahead of the introduction of best interest duty legislation.
ME Bank made the decision following consultation with industry and stakeholders to ensure the change meets the needs of customers and brokers alike.
Moving forward, the non-major will be reviewing each account twice over the first year, at 6-month and 12-month intervals post-settlement, in line with the remuneration reform developed via the Combined Industry Forum which requires the value of upfront commissions to be linked to the amount drawn down by borrowers instead of the loan amount.
If the customer has drawn down additional funds greater than $10,000, additional upfront commission will be paid to a maximum of the approved facility.
According to ME head of broker distribution, Mathew Patterson, the new commission model provides a “greater degree of flexibility” for brokers.
“Our policy allows brokers to meet the needs and objectives of each customer while ensuring brokers aren’t financially penalised through having to possibly wait for almost a year to be paid,” he said.
“More than 60% of brokers are single or dual operators running small businesses, according to the Mortgage and Finance Association of Australia, so cash flow is critical.”
The change is effective on new loans submitted from 1 May 2020.