A broker group has said that implementing the recommendations from the Hayne Royal Commission will set the Australian home loan market back 30 years, by empowering the major banks at the expense of customers.
Finsure managing director John Kolenda said the recommendation to remove trail commissions without any consultation with the industry was “perplexing” as brokers had revolutionised Australia’s home finance sector and was now responsible for nearly 60% of all home loans written.
“We are fully committed to protecting consumer outcomes, our brokers and the industry,” he said.
“If Commissioner Hayne had bothered to ask, he would have heard that brokers have been pivotal in driving competition and transferring the power away from the major banks towards the smaller banks, regional banks and non-bank lenders, providing more options for consumers.
“But any drastic change to overall remuneration economics will put the market back 30 years and see consumers paying significantly more each month.”
Kolenda said the lending landscape had become highly complicated and confusing since the Hayne Royal Commission, with lending restrictions and forensic scrutiny of borrower expenses dramatically reducing borrowing power for consumers.
“We have seen a dramatic reduction in borrowing capacity for consumers with many being disheartened by the scrutiny of the major banks in analysing their expenses,” he said.
“The average consumer qualifies to borrow 20% less now than six months ago and the criteria varies drastically across the lending landscape.
“The biggest hit are the SMEs, who are finding it extremely difficult to borrow any money and are reverting to paying much higher rates from private lenders in order to survive.”
Kolenda said many high-profile commentators from outside the industry sector had spoken out against the Hayne recommendations to remove trail commissions as well as their impact on the contribution mortgage brokers make to enable consumers to get the best deal.
“Hugely respected financial commentator Noel Whittaker noted his appreciation of the work brokers do when he was researching for a home loan,” Kolenda said.
“He said: ‘The options were overwhelming; the criteria for loan eligibility were inconsistent and confusing; fees and loan rates varied from lender to lender and the choice of most suitable lender often turned on whether the borrower could meet certain eligibility criteria. My conclusion was that it was far too hard to do it on my own – it’s best to get a mortgage broker’.”