Mortgage brokers have another win from the federal government after buying more time to earn commissions for draw downs on extra debt.
Borrowers typically ‘draw down’ when requesting more funds than the purchase price to fund renovations.
‘Best interest duty’ terms have been extended to 365 days from the proposed 90 in a policy Treasurer Josh Frydenberg announced this week.
The government’s ‘best interest duty’ reforms for mortgage brokers limited the payment of commissions to be linked to the amount drawn down by borrowers instead of the total potential maximum loan.
A bank would pay the commission to the broker for any extra loan amount drawn down within 90 days which has now been extended to 365 days.
Mark Hewitt from Australian Financial Group is a supporter of the policy announcement.
“Thanks to Mr Frydenberg and the government for consulting with the industry and reaching this sensible outcome,” he told Australian Financial Review.
“It will ensure brokers continue to be fairly remunerated for their hard work in finding the right solutions for their customers.”
Those opposed to the extended terms say a 90-day draw down period safeguards against the broking industry recommending larger mortgages than people need in order to maximise commissions.
To counter these fears the government has introduced a ‘best interest duty’ and is banning campaign and volume-based commissions.