The head of an aggregation group has said enforcing a fee for service model would be “financially detrimental for everyday Australians paying off a loan”.
The idea of scrapping commissions for mortgage brokers has been discussed at the Royal Commission into banking misconduct.
Commonwealth Bank CEO Matt Comyn expressed his preference to move to a fee for service system during his appearance at the start of the seventh round of hearings.
Finsure group managing director John Kolenda said that everyday Australians like first home buyers, mum and dad investors and small businesses would be the “biggest losers”, as every time they wanted a better deal they would need to pay.
He warned that banks could take advantage of that situation and said that the broker industry had been disappointed by the narrow field of reference in relation to evidence surrounding broker commissions.
He added, “I am surprised that a review of the poor behaviour of some banks could result in an overhaul of a broking industry that has been incredibly beneficial for home buyers.
“A review of broker commissions requires a much broader and detailed frame work of consultation and engagement.
“Any moves to change the commission-based system will seriously damage the broking industry and leave consumers without the adequate support and guidance of brokers to obtain the most competitive home loan.
“The Hayne Royal Commission has been doing a fantastic job but some of the reporting and commentary relating to the mortgage broking sector has been very selective and there has been no opportunity given to challenge all sides of the argument for the betterment of the home buyer.
“At the heart of this discussion are thousands of first home buyers, mum and dad investors as well as small businesses who all need help to get the best results for their circumstances in a confusing lending landscape.
“So far there has been limited engagement of the stakeholders delivering these services and the impact to these consumers who just want to secure their home or support their business to make sure there is adequate competition in the sector. This is the only way the little guys win.”
Kolenda said since the start of broking in Australia in the early 1990s, lender margins have reduced by more than 2%, saving consumers more than $30billion a year in interest payments.
This has flowed through the market in other ways, helping consumers to build wealth and stimulate the economy.
Kolenda added, “Any drastic change to the way that brokers are remunerated will only reduce their influence in the market place and this will put Australia back to an age where the major banks dominate the market and see consumers paying significantly more each month due to reduced competition in the mortgage market. Smaller banks and non-banks would not be able to compete against the Big Four.
“There are a number of overseas examples of over regulation that has produced this outcome. We need to be very careful that any major structural change does not materially impact consumers in a negative way, making home loans more expensive and/or dramatically reducing borrowing power, which will flow right through the entire economy.”