Australia’s leading mortgage broker, Aussie Home Loans, rejects the Productivity Commission’s recommendation for trail commissions to be removed.
Aussie CEO, James Symond, says he is deeply disappointed the Productivity Commission has not taken on board the industry’s resounding rationale and arguments for retaining trail commissions.
Mr Symond said “We, as is the rest of the mortgage broking industry which supports more than 27,000 FTE workers and provides over 55 per cent of home loans in Australia, are staggered that the Productivity Commission has chosen to ignore our case for retaining trail commissions. We reject its premise that this form of remuneration creates “perverse incentives” for brokers by “rewarding” them for keeping customers in their current loan.
“Despite what the commission believes, the vast majority of mortgage brokers continue to act for their customers well after the loan is secured for them and trail commissions are important in ensuring brokers continue to be committed to servicing them for the life of the loan amid ever changing market conditions.
“Mortgage broking isn’t just a transactional, set and forget game. It’s about ongoing relationships and making sure customers have the right loan for as long as a loan’s required, and trail commission enables this to the consumer’s benefit. Without trail, brokers will need to dedicate more of their time and efforts to attracting and helping new customers in order to sustain their businesses,” he said.
Mr Symond added that it was impractical to justify the trail removal on the basis that other sectors in the financial services industry have, as the mortgage broking industry operates on an entirely different model that does not reward churning customers.
“Moves to ban trailing commissions will simply reinstate the power of the major banks, drastically impact choice and competition for customers, and ultimately drive up interest rates for consumers.”
He noted that the Productivity Commission’s recommendations were contradicted by the recent ASIC Remuneration Review, which concluded there were no grounds to remove trail commissions and the findings of the recent industry report by Deloitte.
Deloitte’s report highlighted the many benefits of mortgage brokers, including:
- Mortgage brokers strengthen the entire Australian mortgage lending industry by fostering competition and therefore supporting all Australian home buyers and investors.
- The mortgage broker channel has contributed to a fall in lenders’ net interest margins of more than three percentage points over the past 30 years.
- Mortgage brokers drive competition by improving access to lenders that are not major banks or their affiliates. The share for these lenders increased from 21.4 per cent in 2013 to 27.9 per cent in just four years.
- The mortgage broking industry contributes $2.9 billion to the Australian economy each year.
- A mortgage broker’s business depends upon delivering a good outcome for their clients- more than 70 per cent of their business is referred from existing customers.
Mr Symond concluded “I encourage the Federal Government and regulators to take all of these factors into consideration before taking any action that will be to the detriment of consumers and a thriving industry sector.”
For more information about Aussie, visit www.aussie.com.au.