The debate between banks and mortgage brokers continues in earnest after the mortgage broking industry defended itself against criticism from banks over its members and business model.
Brokers say recent criticism from banks amid the banking royal commission are a diversionary tactic and that if a flat fee for their service was introduced it would make home loans more expensive.
In a letter to members, Mortgage & Finance Association of Australia CEO Mike Felton said banks were trying to stifle competition and were using brokers as a distraction to get through the Hayne banking royal commission.
“Let’s be clear, brokers deliver enormous economic value to the banks, and now some big banks want customers to pay for it,” the email read.
“This is like asking a home buyer to pay the auctioneer and vendor’s selling costs.”
The MFAA say there’s around 16,000 mortgage brokers in Australia who settled $52 billion worth of loans on the September quarter. That’s over half of all residential loans.
MR Felton says mortgage brokers encourage competition, which reduces the net interest margins of banks and a move to a flat fee would spell disaster to consumers.
“If a consumer-based fee for service is introduced, customers will not just face new broker charges, but higher interest rates as the big four banks would then be permitted to restore their lost interest margins,” he said.
“It is therefore not surprising that a large bank would advocate for a consumer-based fee service – clearly it would be very good for their profitability and their shareholders, however it would be a very poor outcome for competition and Australian consumers.”
The prospect of a flat fee for broker service is currently being looked at in depth by the Combined Industry Forum.
