Trail Commission Remains To Encourage Competition
The government has reviewed and consulted the mortgage industry when reviewing the impacts of removing trail commissions has disregarded the recent Hayne Report final report recommendation for at least three years. Treasurer Josh Frydenberg said yesterday in his announcement that the government will review this recommendation in three years’ time as opposed to abolishing it next year as originally claimed as there were major concerns regarding competition in the lending market giving the major banks a significant advantage.
In Treasurer Josh Frydenberg announcement on Tuesday (12 March), “following consultation with the mortgage broking industry and smaller lenders, the Coalition government has decided to not prohibit trail commissions on new loans but rather review their operation in three years’ time. Mortgage brokers are critically important for competition and delivering better consumer outcomes in the mortgage market. Almost 60 per cent of all residential mortgages are settled by mortgage brokers” Mr Frydenberg said.
He also highlighted key facts how mortgage brokers support the local small business economy “There are 16,000 mortgage brokers across Australia – many of which are small businesses – employing more than 27,000 people. The government wants to see more mortgage brokers, not less,” he said.
“Only the government can be trusted to protect the mortgage broking sector and ensure that competition is strengthened so consumers get a better deal”. The Treasurer added that the government was already “taking action on all 76 recommendations contained in the final report” of the banking royal commission with new measures it was looking to implement in the near future, including:
- a best interests duty that will legally obligate mortgage brokers to act in the best interests of consumers;
- a new requirement that the value of upfront commissions be linked to the amount drawn down by consumers;
- a ban on campaign and volume-based commissions; and
- a two-year limit on commission clawbacks.
“These changes will address conflicts of interest in the industry by better aligning the interests of consumers and mortgage brokers,” Treasurer Frydenberg said.