Westpac Group has announced that it will introduce new changes to the way brokers are remunerated as part of a move to “enhance transparency and customer outcomes”.
Effective 1 January 2019, Westpac and its subsidiaries St. George, Bank of Melbourne and BankSA will link upfront commission payments for standard home loans to net debt utilisation and inclusive of loan offset arrangements, rather than the approved loan limit.
The group noted that the amount of upfront commission paid for most home loans will now be calculated as a percentage of the amount drawn down and used by the customer at settlement, excluding any amount that remains in an offset account.
Westpac general manager, home ownership, Will Ranken said: “We know many of our customers value the independent service and advice mortgage brokers provide.
“Westpac Group continues to be an active participant in the Combined Industry Forum (CIF) and supportive of its work to ensure better customer outcomes.
“We believe the changes we are introducing will be the start of delivering a more transparent commission model that better meets the needs of consumers and [the] industry.
“We remain committed to supporting mortgage brokers to ensure we are providing the right home loan solutions for our customers.”
Westpac also stated that the new commission structure for standard home loans will also allow for a subsequent upfront commission for when brokers arrange loans for customers with funds held in offset accounts for a short-term future purpose like renovations.
The bank said that the changes will mean if a customer takes out a $400,000 home loan and purchases a property for $350,000 and puts $50,000 of that loan into an offset account, the broker will be paid an upfront commission based on the $350,000 amount.
Westpac added that if the customer then draws down the $50,000 in the offset account in the 12 months following settlement, the broker will receive a subsequent upfront commission calculated on the $50,000.
In addition, Westpac Group noted that it will implement improvements to increase the transparency of customer disclosure of the commissions mortgage brokers receive, including providing details of how the commission paid to mortgage brokers will be calculated.
According to Westpac, the new changes will also provide brokers with access to priority service arrangements for their clients if they “consistently meet quality loan application measures”.
The group added that there will be no requirement for brokers to meet any dollar volume business threshold to access these new arrangements.
Westpac Group said that the measures are part of its commitment to implementing reforms recommended by the CIF to “ensure better consumer outcomes”, which it said includes preserving and promoting competition and consumer choice, and improving standards of conduct and culture in mortgage broking.
Westpac also stated that the changes to commission calculations do not apply to Construction Loans, Equity Access Loans or Portfolio Loans, as the commissions for these products remain unchanged in line with the CIF recommendations, and it said that changes to the commission model and service model will take effect by 1 January 2019.
Changes to make commission payments more transparent to Westpac Group customers will start being made in February 2019.
[Related: Major bank changes broker commissions]
Charbel Kadib is a journalist on the mortgages titles at Momentum Media.
Before joining the team in 2017, Charbel held roles with public relations agency Fifty Acres, and the Department of Communications and the Arts.
Charbel graduated from the University of Notre Dame Australia with a Bachelor of Arts (Politics & Journalism).
A non-major bank has announced that it is recruiting for a new ...
A major mortgage aggregator “cannot understand” why Commissio...
A new program for brokers looking to continue business coaching a...