The Coalition victory at the federal election on Saturday is very good news for our industry and brokers should breathe a sigh of relief. Under a Coalition government, mortgage brokers can expect there will be no significant changes to their remuneration structure for at least another three years.
The Royal Commission into Misconduct in the Banking, Superannuation and Financial Services Industry in February this year, gave rise to a number of recommendations for changes to the way brokers are paid. Initially both major parties agreed ‘in principle’ to all of Commissioner Hayne’s recommendations; however, in the months following it became clear there was the potential for considerable negative outcomes for brokers and consumers resulting from the proposed changes.
Both Labor and the Coalition subsequently decided they would not support charging consumers an upfront fee, as recommended by Commissioner Hayne. However, Labor remained committed to banning trailing commissions from July 2020 and setting a fixed fee (1.1%) for upfront commissions.
The Coalition on the other hand, said it would keep upfront commissions as is and delay its decision on trail commissions for three years. Trail and upfront commissions would then be subject to further review, with the impacts of changing or removing them being properly assessed.
Earlier this month, Treasurer Frydenberg appeared to have a clear understanding of the issues when he said: “… mortgage brokers play an absolutely critical role in our economy, and they help generate competition in that market, and we don’t want to see mortgage brokers put out of business with, effectively, their business just migrating to the big banks.”
The Coalition supports the following recommendations from Commissioner Hayne:
- a best interests duty obligating mortgage brokers to act in the best interests of consumers;
- a new requirement that the value of upfront commissions be linked to the amount drawn down by consumers;
- a ban on campaign and volume-based commissions; and
- a two-year limit on commission clawbacks starting from 1 July 2020.
The government has also announced its First Home Loan Deposit Scheme, which will allow first home buyers to access a mortgage with a deposit of just 5 percent, without paying Lenders Mortgage Insurance. The scheme will help 10,000 first home buyers purchase a home and the government expects it to assist in slowing the housing downturn, stimulate the housing construction sector and generate positive knock-on effects for the economy.
We expect more activity going forward so contact us on 03 9602 3477 to discuss your scenario.