While it is great news the government is recognising the importance of mortgage brokers, the Treasurer’s announcement that it would now not ban trail commissions from 1 July 2020 as originally suggested brings another three years of wondering.
The party announced yesterday (12 March) that after consultation with the broking industry and smaller lenders, it would review the operation of trail commissions in three years’ time at the same time as reviewing the continuation of upfront commissions. If the Liberals are elected, that is.
In his statement, Treasurer Josh Frydenberg even went as far to say: “The government wants to see more mortgage brokers – not less”.
Mortgage brokers will understandably be relieved at the news – particularly as all previous reviews into remuneration have concluded commissions as the best method. However, they now face another three years of waiting to see if their industry will change, and then the actual review itself.
Small broking businesses have already raised concerns about expanding with additional staff when they do not know what the changes to their remuneration will be.
While industry groups came out to celebrate the decision, some also urged caution. This announcement and Labor’s opposition to a customer-pays model comes ahead of a general election.
AFG chief executive officer David Bailey said, "It's important that our industry not be a political football heading into an election so that the 26,000 small businesses, their families and, importantly, their customers have certainty about the future of the sector.
"We welcome the fact that there's been a broad understanding of the essential service that our industry provides and the need to maintain that ongoing service for our customers. Like the government, Labor has also recognised the importance of the industry and it's vital we go into the election with bipartisan policy."
Association efforts to continue
Managing director of the FBAA also provided a cautious welcome of the government’s decision.
Peter White said, “I applaud the announcement by treasurer Josh Frydenberg but it won’t end our efforts to see the correct polices in place to protect consumers from the greed of the big four banks.
“The Coalition’s announcement to keep trail commissions has been delivered in a pre-election environment so uncertainty remains about how exactly this will work after the election.
“I look forward to seeing Labor’s response to the Coalition announcement because this now opens up another point of difference in an industry that is supported by most Australians.”
White said the FBAA will ask for the fine print of exactly what is proposed by both sides of politics to ensure that competition is enhanced, consumers are protected and brokers continue to offer a valuable service to borrowers.
“We don’t know who will be in power after the next election or how the upper house will work but we will continue to make every effort to ensure brokers continue to have a viable industry and borrowers are not squeezed by the big banks,” White added.