While the initial reaction to Commissioner Hayne’s recommendations has focused on bank integrity and share prices, Australian Broker has heard from professionals across the industry who are concerned about the economic impact on everyday Australians.
Slipstream founder and CEO John Manciameli predicts the wider impact of report could see a steep rise in interest rates as competition between lenders contracts.
“Australians are unaware of the impact of losing those lenders that only distribute their products though mortgage brokers. I’ve said since last year this country was going to have its first recession in a long time if they keep limiting credit.
“Imagine you’re living in Wagga Wagga and you want to access ING’s home loans that don’t have a branch, how are you going to do that? Without competition we know that interest rates are going to go up within the big four banks.”
Further, the impact of Hayne’s recommendation on trail could lead to a drop in overall broker numbers, which in itself is likely to prevent many from accessing credit.
“Unfortunately, with the lending environment how it is right now, the consumer who doesn’t have a broker will be going into a bank uneducated and with no awareness of credit policies,” says Mortgage Choice owner and manager, Deslie Taylor.
“Those who are declined by multiple banks before going to a broker will have a badly damaged credit file due to the decisions that have been made in an uneducated fashion,” she warns.
Elsewhere in Australia, additional factors are also at play.
In WA for example, dwelling values declined 2.3% in the December quarter making it the worst quarter on quarter decline since 2008 and the current median house price in Perth is equivalent to values last seen in March 2009.
For Bianca Patterson, director at the Perth-based Calculated Lending, such downward pressure on the market reshaped the broker-client relationship a long time ago.
Asked how she believes Hayne’s recommendations will influence the market over the coming years, she says, “I think we will run into some considerable issues.
“I really worry what the knock-on effect and the changes to broking will do to the property market.
“In WA, brokers have had to refine their skills and learn a new way of broking. It hasn’t been about refinancing clients or purchases for us in the last few years, it’s been about trying to maintain the client’s expectations, help them with pricing because their LVR went from 80% to 105%. It’s been about trying to negotiate interest only extensions when the LVR has increased and our clients are struggling to make repayments,” she says.
However, other recommendations could bring a more positive future for broking.
With regards to the best interest duty set out by Hayne, Patterson says it has the potential to put brokers on the front foot.
Calling for a clear definition of what “best” would mean in legislative terms, she says, “I 100% welcome that change and I think a lot of other brokers do too.
“Many brokers feel we already work in the best interests of our clients anyway so I kind of feel why not regulate it and let’s make it our clear point of difference from the banks.”
Until legislation is passed, no change to the industry is set in stone and, while the iron is hot, Manciameli says the industry should come together to fight any potential changes.
Calling for the industry to act while there is still time, he says, “We as mortgage brokers must get together and start educating on why it’s going to be bad for the consumer, because they will be paying the ultimate price in terms of time and money.
“Then the lenders and aggregators need to step up and educate the public and the government to say this is not a good thing. It's going to restrict lending, it’s going to make innovation stop. People are going to find it harder to find finance,” he adds.