The recommendations by the Royal Commission aims to introduce a best interests duty for brokers --- but will this really sit well with borrowers?
In a podcast on Smart Property Investment, Ben Kingsley, the chairperson of the Property Investors Council of Australia's board of directors, said the recommendation to ban broker commissions and to shift to a consumer-pays model might be "contradictory" to the best interests duty the Royal Commission is eager to achieve.
He said many borrowers might not have the capacity to afford fees for mortgage advice, resulting in many not being able to access the right products.
"If there is one thing that we have learned through this process, it is that we need more competition. We need more options. We need more choices. Not fewer. And that is what the Treasurer and I are concerned about in terms of how we would go forward on that one recommendation on broker remuneration," he said.
Borrowers continue to see the value in using brokers, if recent industry figures are to be believed. According to CoreLogic and Mortgage and Finance Association of Australia (MFAA), mortgage brokers settled 59.1% of all residential home loans during the September quarter last year, the highest broker market share to date.
Another study, this time by Deloitte and MFAA, revealed that brokers are rated as more likely to be acting "in the best interest" of customers.
"Some 40% of broker customers felt the broker acted in their best interests at all times, compared to only 22% for direct to lender customers," the study said.
However, when asked if they would pay for the services provided by the broker, 37% said they would not instead go directly to the lender if they are required to pay.
"In the focus groups, customers strongly agreed that the broker should be remunerated for the value they are providing and were comfortable with the current method whereby the lender remunerates the broker by commission," the study said.
Collections: Mortgage News
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