Royal Commission backfires on mortgage broker reform: Pete Wargent
Pete WargentDecember 17, 2020
EXPERT OBSERVER
Labor's Bowen and Shorten had insisted they'd adopt all of the Royal Commission recommendations sight unseen - a pretty much ill-advised idea when you think about it - ostensibly because they wanted to be seen as 'tough' on the banks, but just as likely to put pressure on the government to clamp down on lending and credit further.
What the ALP think-tanks hadn't foreseen is the major banks getting off relatively lightly and some cataclysmic reforms recommended for the mortgage broking industry, especially in terms of commission structure.
The initial reaction from Bowen, on his Twitter feed, seemed to misread the mood:
The Coalition (and apparently even the Reserve Bank Governor) believe that ramming through such wholesale changes to the broking industry warrant caution, since they'd reduce competition in the market, line the pockets of the 4 major banks as they carve up more market share, and decimate the mortgage broking industry, putting thousands of brokers out of business.
My view is that overwhelmingly brokers add value to consumers, and help borrowers to navigate the maze.
Some of the information put forward by the banks during the hearings was misguided at best, misleading at worst.
Although naturally a 'best interest' test must be enforced, the existing model is superior to a potential fee-for-service alternative.
It'll be interesting to see whether Bowen is so in favour of implementing all recommendations now.
If I was a betting man I'd say the ALP will demur on this point, or give a waffling or non-committal answer...else they'll face instantly losing the votes of 16,000 brokers.
Of course, they might well decide that they don't need those votes anyway given signals from internal polling, but let's see what their response is, if any.
PETE WARGENT is the co-founder of AllenWargent property buyers (London, Sydney) and a best-selling author and blogger.
Pete Wargent
Pete Wargent is the co-founder of BuyersBuyers.com.au, offering affordable homebuying assistance to all Australians, and a best-selling author and blogger.