If you are thinking about taking out a home loan or refinancing an existing loan using a mortgage broker, this may be the last year you will be able to do so without having to pay upfront fees under the proposed changes.

In a radical shake-up to the mortgage broking industry, the Royal Commission’s final report published on the 4 February 2019, has called for the ‘commissions’ paid by banks to brokers for selling their product to be axed, giving more power to the big four banks. Banking in Australia is dominated by four major banks: Commonwealth Bank of Australia, Westpac Banking Corporation, Australia and New Zealand Banking Group, and National Australia Bank.

To explain how it works at the moment, our mortgage broker Reece, sources a home loan or refinances an existing loan for you. This is a personal service where he will search the whole market to source the right products for you and then negotiate with the lenders on your behalf to facilitate them competing for your business. As part of this process we use the big four banks as well as other smaller lenders.  He works closely with you to understand your needs from the start to find you the best deal and offers impartial advice so one lender isn’t favoured over another.

Under the new recommendations set out by the Royal Commission, banks will be banned from paying mortgage brokers commissions so a mortgage broker would have to charge the customer for their services. The proposed changes are expected to be enforced by July 2020.

key to the door

Interest rates expected to rise

There will be many repercussions from the mortgage and finance industry following this report. The peak industry body for more than 13,000 finance brokers, the Mortgages and Finance Association of Australia (MFAA) has already launched an advertising campaign aimed at convincing the Federal Government to delay or diminish the changes.

Unfortunately, it will also have a big impact on the customer as it may change their minds on whether to use a broker at all, effectively giving the big banks even more power. This report has blindsided the industry and shocked the nation considering the Royal Commission was set up to protect the consumer from the power the big banks have over the financial system in Australia.

We will endeavour to keep you up to date with the latest regulatory changes and when they are likely to be enforced so you can make informed decisions when planning your financial future.

If you have any questions about this or would like to discuss a home loan please contact Reece on 0420 655 533 or contact the office to schedule a consultation.