MORTGAGE CHOICE chief executive officer, Susan Mitchell, has welcomed the Federal Government’s decision today to maintain trail commissions on new loans and undertake a review in three years.
In his statement today the Treasurer, Josh Frydenberg, said abolition of trail won’t proceed in 2020 because the government is concerned about the adverse effect on competition in mortgage lending market. He also conceded that abolishing trail would be “a free kick to the banks”.
The government will review trailing commissions in three years time, as well as the feasibility of continuing upfront commission payments. The review will be conducted by the Council of Financial Regulators and the Australian Competition and Consumer Commission (ACCC).
Treasurer Frydenberg acknowledged that mortgage brokers and small lenders are “absolutely critical in the mortgage lending market”.
Ms Mitchell said, “I wholeheartedly support Treasurer Frydenberg’s announcement to maintain trail commissions. It is clear that abolishing trail would have an adverse effect on the home lending market and would be detrimental to competition.
"Australia’s 17,000 mortgage brokers will applaud the Government’s common sense decision to keep trail commissions. ASIC’s 2017 Review of Mortgage Broking Remuneration Report did not identify trail commissions as directly leading to poor consumer outcomes, nor recommend the removal of trail commissions.
“The figures speak for themselves. The latest data shows that 59.1 percent of home loans originate through the mortgage broking channel, yet Australian Financial Complaints Authority (AFCA) data for the month of November 2018 revealed that of 6,522 complaints against financial service providers, only 29 related to mortgage brokers. This is less than half of one percent of reported complaints.
“Furthermore, brokers drive competition in the lending market. Proof of this can be seen in Mortgage Choice residential settlement figures, which show that in the past two years the big four banks have lost 10 percent of market share to smaller lenders.
“Maintaining competition in the mortgage industry is of the utmost importance to every borrower in Australia. Mortgage Choice brokers have been helping Australians realise their property ownership goals for 27 years.
"We believe that maintaining trail commission will ensure a strong mortgage broking industry and allow brokers to continue to guide Australian borrowers through what may be the most significant financial commitment of their lives - buying their home,” Ms Mitchell said.