What is the cost of obtaining a mortgage in Australia?

As we lead into another Federal Election, one of the significant political issues leading into the last Federal Election was the Royal Commission into the Banking, Superannuation, and Financial Services Industry, or as it became known as the Hayne Review.

The Hayne Review highlighted 76 recommendations, one of which was a review of the remuneration of Mortgage Brokers. The model that had been adopted was that the lender pays a commission to the Broker for placing business with them; the Royal Commission recommended sweeping changes to the model.

Leading into the 2019 Federal Election, the proposed review became an issue. Eventually, the incumbent Government and the Opposition announced they would delay the review until 2022.

Last week, in an announcement by the Federal Assistant Treasurer and Minister for Housing, Michael Sukkar MP, the minister noted the 2022 Review of the Mortgage Broker Remuneration by the Council of Financial Regulators and ACCC would no longer be required.

"The mortgage broker industry plays an important role in helping Australian homebuyers get a better deal and have more choice when choosing a home loan provider," Mr. Sukkar said. 

"The Morrison Government will continue to strengthen competition between lenders and drive better outcomes for consumers to ensure that Australian homebuyers get the best deal possible on their home loan.

"We have worked closely with mortgage brokers and strengthened outcomes for consumers by implementing several reforms following the Banking Royal Commission."

Based on the government's feedback on the effectiveness of reforms to date, the assistant treasurer said the government had formed the view that the current mortgage broker remuneration structures are "effective in providing consumers the choice they need when choosing a home loan provider." Mr. Sukkar said. 

The Council of Financial Regulators, including the Treasury, ASIC, and the ACCC, will continue to monitor the sector to ensure it is delivering for consumers.

So why the change of heart? 

Over the past few years, the industry has implemented new Best Interests Duty regulations. Best Interests Duty has aligned consumer and broker interests and expectations. These reforms have and continue to deliver strong customer outcomes and drive customer trust and confidence in the industry. 

Over the same period, we have seen a steady increase in the number of loans written via brokers rather than directly with Banks. Mortgage Broker Written Loans are now at an all-time high of 2 to 1, meaning for every loan a bank writes internally (e.g., via their branch network), the Broker industry writes two loans.

So, what does this mean for you? Ultimately it means the lenders will continue to pay for the advice to source a mortgage, and the cost will not directly be borne by you, the consumer.

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