The Federal Government has ditched a key recommendation from the Royal Commission to scrap trail commissions for new loans arranged by mortgage brokers. The mortgage broker industry, which had warned that many brokers would go out of business if the Hayne recommendation was approved, cheered Treasurer Josh Frydenberg’s announcement that the Government will review trail commissions in three years if it remains in government.
Frydenberg acknowledged that mortgage brokers and small lenders are “absolutely critical in the mortgage lending market”. He said that abolishing trail would be “a free kick to the banks”.
Mortgage Choice CEO Susan Mitchell says Australia’s 17,000 mortgage brokers will applaud the Government’s “common sense decision”. “It is clear that abolishing trail would have an adverse effect on the home lending market and would be detrimental to competition,” she says. The latest data shows that 60% of home loans originate through the mortgage broking channel, yet Australian Financial Complaints Authority (AFCA) data revealed that of 6,522 complaints against financial service providers in November, only 29 related to mortgage brokers.