Fee-for-service ‘failed’ in Netherlands

Figures show the number of banks dropped by over half when commissions were scrapped

Fee-for-service ‘failed’ in Netherlands


By Rebecca Pike

A broker group has said the ‘Netherlands model’ recommended by Commissioner Hayne in the final report has actually proved to be a huge failure in the Netherlands since it was introduced in 2008.

The country’s use of a borrower pays fee for service was mentioned during the Royal Commission and subsequently recommended in the final report.

But according to a 2017 report entitled Banking in the Netherlands, obtained by Loan Market Group, the total number of banks in the Netherlands decreased from 99 banks in 2007 to just 44 banks in 2017.

Mortgage broker commissions from lenders were completely banned in 2013, after being phased out from 2008.

The Statista report found the size of the banking sector as a whole in the Netherlands decreased by almost half. The total number of bank offices was approximately 3,400 in 2008. In 2016, this was less than 1,700.   

The report categorised the Dutch banking sector as “one of the most concentrated in Europe”.

Additionally, Moody’s Investment Services 2018 report found one of the biggest Netherland institutions, ABN Amro’s net interest margins have grown steadily since 2010.

The top five big banks in the Netherlands (including ING, Rabobank and ABN Amro) now control 83.8% of the Netherland’s marketplace.

In comparison, the Australian marketplace net interest margins of major and regional banks have been on a steady decrease since brokers were introduced into the sector in the mid-1990s, according to the Reserve Bank of Australia.

Loan Market Group said this set of data demonstrates a pronounced lack of competition in the Netherlands, significantly contracting the banking sector, with mortgage brokers no longer having the ability to introduce borrowers to numerous products offered by the smaller banks and lenders.

Loan Market Group executive chairman Sam White said, “This just further demonstrates the Netherlands model would be a terrible outcome for Aussies.

“This model has resulted in fewer lenders and fewer options for Dutch consumers. I fail to see how this is the best option for our marketplace.

The model that has been held up as the roadmap for the Australian mortgage market has been proven, by this research, to result in less competition and the highest concentration of big banks in Europe.

“This means customers have less choice, pay more fees and will get stuck in a home loan because the cost of changing will be too much as they’ll need to fork out each time they want something changed.”

White criticised the commission for not researching information like this before making the recommendation.

“It is astounding people have spoken about the Netherlands model with such enthusiasm when we were able to find this solid research very quickly and easily online,” he said.

“It would be nice to think the Commissioner and his team might have done more research than they have, before turning the mortgage industry on its head and recommending a financially detrimental solution for everyday Aussies who are looking for the best home loan solution.”

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