Broker recommendations could impact customers and competition: Heritage Bank boss Peter Lock

The Hayne Royal Commission’s recommended changes to the mortgage broker remuneration model are well-intended but could cause consequences that ultimately leave the customer in a poorer position.

I urge the Federal Government to take great care in considering how this recommendation could be implemented, to retain the spirit of the change without severely affecting the broker industry.

Heritage Bank understands the need for financial services providers to have the best interests of customers as their top priority at all times, as that’s the central ethos of the customer-owned model.

However, banning commissions for brokers could actually be detrimental to customers, and give the big banks a free hit.

We do not support increasing the costs for customers to obtain a home loan, in the form of a customer-paid fee-for-service, and worsen the current affordability crisis for those customers already struggling to afford a home.

Nor do we condone the significant impact to competition that these measures are likely to create.

It is crucial that we maintain competition in the sector. The Royal Commission recommendation would create severe challenges for the broking industry and give more power back to the major banks.

The broker channel is vitally important for smaller lenders that do not have the large distribution footprint of the major banks.

At Heritage, we rely on brokers to grow our member base nationally, particularly outside of our home state of Queensland.

A major contraction of the mortgage broking industry would reduce competition and put the big banks in an even more powerful position in the home loan market.

We are a regionally headquarted bank, based in Toowoomba, and understand the importance of brokers in both regional areas as well as in capital cities in being able to support consumers’ access to competitive home loans.

Customer-owned banks such as Heritage operated in a fundamentally different way to the banks that were found to have systemic issues during the Royal Commission.

One of the key findings of the Royal Commission was the motivation of greed, both for personal gain and for higher profits for the business and shareholders. This is where customer-owned banks are fundamentally different - our members are our owners, and as such, profit is not our highest priority.

Heritage Bank is committed to supporting the mortgage broker channel, and we will continue to work with all industry participants to lobby for competition and viability of the broker channel to be maintained.

 

Peter Lock is the CEO of Heritage Bank.