The Mortgage & Finance Association of Australia has accused consumer advocacy groups of being “ill-informed” after CHOICE called for action to cut the conflicts in home loan sales to protect consumers.
The Australian Securities and Investments Commission (ASIC) is presently reviewing mortgage broker remuneration, with submissions from the MFAA, CHOICE and others revealing a range of views, with the broker commission model particularly divisive.
“Consumers deserve better than what they’re getting from most mortgage brokers. They’re using brokers as guides for what is life’s most significant financial decision - buying a home. Getting a poor loan can mean tens of thousands or even hundreds of thousands of dollars more over the life of a mortgage,” says CHOICE head of campaigns & policy Erin Turner.
“Right now, there is no requirement that a mortgage broker has to act in the interests of the customer by recommending the best or even a good loan. Mortgage brokers should be driving competition in the banking sector but the way mortgage brokers are currently paid means it’s very unlikely that a customer is going to get a loan that’s best for them.
“This industry needs a major change. It’s time to cut out the dodgy practices – from bonuses or trips to the Caribbean for flogging loans to commission arrangements that mean that lenders interests get put ahead of customers.”
However, MFAA CEO Mike Felton said the proposals posed by the joint submission of consumer advocates would significantly harm the interests of consumers.
“A fee-for-service model may suit lenders, but it would drive the majority of brokers out of the industry. This removal of access to brokers for Australians would severely reduce competition in the industry, which is something we are trying to avoid for consumers,” he said.
“I do not see how removing brokers from the industry, and consolidating power back in the hands of banks, serves the needs of consumers.”
Felton added that the ASIC Report does not recommend a flat fee-for-service model or the removal of trail commissions.
“A single, lender-funded, fee-for-service would lead to a standardisation of all fees, which we believe ASIC itself does not support and we believe would also be considered anti-competitive by the ACCC,” he said.
“All our commissions are fully disclosed, and the MFAA works very hard to ensure that brokers are transparent about how and why they are paid by lenders. We will continue to work with ASIC and Treasury and the Combined Industry Forum made up of a broad range of key industry stakeholders to seek the best possible outcomes for consumers.”