As you may be aware, Monday was a very important day for our business with the release of the final report of the Royal Commission into Misconduct in the Banking, Superannuation and Financial Services Industry. While the report was initiated to bring to light the issues of misconduct by the major banks, it has instead resulted in an attack on the mortgage broking industry and has jeopardised the future of thousands of small business owners.
The Royal Commission reported that of the cases investigated and found to be negligent just 0.5% of these were introduced by mortgage brokers. 99.5% of negligent cases were direct bank loans, yet mortgage brokers have somehow been thrown under the bus.
Some of the recommendations from the Royal Commission include:
- Clients are to pay mortgage broker’s direct for their services
- Brokers are to act in the client’s best interest
Rather than a bank paying a broker to introduce a client and service them for the life of the loan, the Commissioner has suggested you should pay for our services. This would be okay if banks reduced your interest rates based on the money they were saving by not paying brokers, however, this will not be the case. These savings will simply increase the bank’s profits. Since the Royal Commission report was released Monday, banks have added $19 billion to their value, and this was an investigation into their misconduct. Something doesn’t add up.
The report is also calling for brokers to act in our client’s best interest. This is something our business has always prided itself on and will continue to deliver. Our business relies on our clients having a fantastic experience and achieving a great outcome. This is what keeps you coming back and referring your family and friends. As of today, mortgage brokers account for just under 60% of the home loan market, it is clear we are not the only business providing great outcomes for our clients.
So, what could all of this mean for you, as our client?
By asking customers to pay the brokers direct, the Commissioner will reduce the availability of our services to everyday Australians that cannot afford to pay fees. Customers will then be forced to use major banks with a reduced level of service.
Under the current structure, whether you go to a bank directly or via your mortgage broker, the interest rate and fees are the same, borrowers do not pay anything extra under the existing model. In fact, in many cases, brokers are able to negotiate an even lower rate for you, as we have access to a large variety of lenders. If these changes are implemented, we will see a significant reduction in broker numbers. With fewer brokers, there will be less competition resulting in the banks increasing interest rates and therefore increasing mortgage repayments for everyday Australians.
As we sit here today these changes have not been implemented and are recommendations only. We feel it is important to share these findings with you to give you the opportunity to help us fight against them. I would like to stress that as our existing clients you do not need to pay for our services.
Lastly, I would like to ask for your support to help us educate the politicians on the vital role we play in keeping the home loan market competitive, whilst delivering a fantastic customer experience that the banks cannot compete with. This petition gives you the ability to demonstrate your support for your Inovayt mortgage broker.
If you have any questions at all about the Royal Commission recommendations, please don’t hesitate to contact me or your Inovayt broker.
Nick Reilly, Managing Director Inovayt Finance