Great news for Mortgage Brokers as 2022 Review of Mortgage Broker Remuneration is dropped

The federal government has announced that the 2022 Review of Mortgage Broker Remuneration by the Council of Financial Regulators and the ACCC will no longer be required.

In February 2019, a report from the Royal Commission into Misconduct in the Banking, Superannuation and Financial Services Industry was released. In the report, Commissioner Kenneth Hayne addressed his ongoing concerns regarding broker remuneration arrangements that might be conflicted and warned that lenders that pay value-based commissions to brokers may be breaching their obligations under the National Consumer Credit Protection (NCCP) Act.

The Review of Mortgage Broking Trail Commissions would have introduced new measures to address conflicts of interest in the industry by better aligning the interests of consumers and mortgage brokers.

Earlier this month, the federal government dropped the 2022 broker remuneration review as there was no evidence of mortgage broker misconduct from the current remuneration structure. Further changes to the mortgage broker remuneration regulations will not be made at this time.

This decision comes after strong evidence suggesting that the industry, which had been reforming for the past 5 years, was delivering strong customer outcomes and driving consumer trust and confidence in the industry.

The industry had consistently demonstrated an alignment of interests and expectations between brokers and consumers through low numbers of AFCA complaints, low arrears relative to the lenders’ proprietary networks and strong customer satisfaction rates in comparison to other financial services.

Mortgage brokers now write two-thirds of all new home loans in Australia and in 2021, a Client Experience Report by MyNextAdvice stated that 98.3 per cent of clients believed their broker had acted in their best interests and almost 99 per cent stated they would use a broker again in the future. 93.8 per cent of clients stated they had no concern about commissions when asked about concerns regarding how brokers were paid.

The home loan market continues to perform and see strong activity. In the Mortgage and Finance Association of Australia’s (MFAA) latest Industry Intelligence Service Report, stats showed that the average value of loans settled per broker over a six-month period hit a record value of $9 billion for the first time.

What does this mean for mortgage brokers and borrowers?

A trail commission makes it feasible for brokers to provide ongoing services to their clients and creates an incentive for brokers to provide their clients with a loan that meets their needs.

Ongoing services provided by mortgage brokers to their clients may include:

• Debt consolidation
• Guidance through the construction loan process
• Ordering of property valuation
• Monitoring of interest rates
• Assistance with using home loan features

As the industry continues to grow, mortgage broking businesses will need more people in their workforce. If you’re looking for trustworthy mortgage brokers or other personnel to join your team, fill out the form on this page to speak to one of our specialist consultants.