ASIC's review of mortgage broker remuneration is recommending a raft of changes aimed at greater transparency and improved outcomes for consumers.
Two of the key proposals, a suggestion to move away from incentive payments, and a direction to provide clear details of broker ownership, are set to alter the way the industry operates.
The report says that 'soft commissions', such as travel incentives, and trailing incomes, can 'create conflicts of interest' and may not deliver the best 'consumer outcomes'.
The report also shows just what big business mortgage broking has become. In 2015, the industry wrote $175 billion worth of new loans, accounting for 54.3 per cent of all home loans sold in Australia. A total of $2.4 billion was paid in commission by lenders to aggregators.
John Flavell, CEO of Mortgage Choice, told SCHWARTZWILLIAMS the report shows ASIC is comfortable with the basic modus operandi of the industry, and is simply fine-tuning regulations, which overall will be a positive for the industry.
"We have had a look at ASIC’s report and it is obvious that the regulator believes mortgage brokers provide a tremendous amount of value to consumers," said Flavell.
"ASIC is acutely aware that brokers can play an important role in promoting good customer outcomes and driving competition in the home loan market," he said.
"They [ASIC] believe the logic behind the current commission model, which involves an upfront and trailing commission payment, is sound," said Flavell.
"The proposals that ASIC have put forward are largely fringe-based changes which they believe will improve consumer and market outcomes," he said.
Flavell said Mortgage Choice will work with the government on the proposed changes.
The government is asking for submissions on the recommendations, closing date is 30 June 2017.
Submissions can be made on the treasury.gov.au web site.
You can read the Review of mortgage broker remuneration report here.
Infographics and a summary of the report are available here.
Aussies are fixing their mortgage rates
Women must improve financial literacy to shoulder hard times, survey shows
Record low rates no help to housing affordability