In the wake of the Financial Services Royal Commission, banks are tightening up on mortgage brokers’ fees.
With more and more revelations spilling out at the commission about poor behaviour by banks and financial managers, there’s pressure on the banks to tighten commission payments, increase transparency and responsibility to borrowers.
Bankwest, for example, are reducing their long-term trailing commissions and re-introducing a first-year commission.
Bankwest general manager Ian Rakhit told Australian Financial Review the changes were to ensure it aligns with evolving industry practice and regulator expectations.
Over at the nation’s second-largest mortgage lender – Westpac – they are banning deals where the broker is the applicant and also making changes to controls over switching from investment to owner-occupier loans.
Mortgage brokers in Australia account for just over half of all loans and over $2 billion in annual commissions.
The Productivity Commission and the Royal Commission are currently examining whether it’s better for borrowers to pay a fee to brokers rather than through higher interest payments to lenders.
Mark Haron from the Combined Industry Forum told Australian Financial Review the sector is responding to calls for change and is working on strengthening the relationship between brokers and borrowers.
“All the industry understands further changes need to be made,” he said.
The Commonwealth Bank, which owns Bankwest and has had a tough week at the commission, are tightening qualification standards for new mortgage brokers, toughening security on its existing broker network and pushing more business through its own branch network.
All the scrutiny is making it a challenging time for relationships between brokers and lenders, and some in the broking industry, such as Mike Felton from the Mortgage and Finance Association, say banks are turning the screw to deflect attention from their own systemic issues.
