A majority of brokers would cancel their accreditation or avoid using Commonwealth Bank products if a fees-for-service model is introduced, according to a new survey.
Following on from comments made by the Commonwealth Bank of Australia's (CBA) CEO at the financial services royal commission, which expressed support for a fees-for-service model, mortgage marketplace HashChing surveyed its broker network about what the ramifications would be should fees for service be introduced.
It reported that 57 per cent of broker respondents said they would either cancel their accreditation with CBA or avoid using the lender unless it is entirely necessary, should “CBA’s recommendation for a ‘fee for service’ model come into play”.
Conversely, just over a quarter (27 per cent) of respondents stated they would continue business as usual, while 15 per cent said they would turn to additional revenue streams to ensure future sustainability.
HashChing chief operating officer (COO) Siobhan Hayden observed: “It is no surprise to me that the majority of brokers are against CBA’s suggested fee-for-service model. In fact, a quarter have said they’ll cancel their accreditation with CBA as a result.”
Many in the industry have voiced concern over the CBA CEO’s comments regarding broker commissions, with several aggregators, broker groups and both broker associations hitting out at what they see as “self-serving” comments aimed at driving customers back to CBA bank branches and increasing the bank’s profits.
Further, Alex Whitlock, director of mortgages at Momentum Media, wrote an open letter to the CEO of the Commonwealth Bank of Australia, warning him of the ramifications of his comments and asking him to clarify his stance regarding broker commissions.
The Adviser has not yet received a response.
Building on this, The Adviser has now commissioned Momentum Intelligence to produce a white paper to better inform legislators about the intricacies of third-party distribution.
The cornerstone of the report will be a major survey of borrowers to understand the decisions behind why they chose their mortgage provider, what their sentiment and understanding was around commission and, importantly, what would influence their decision when choosing which distribution channel they would use for a home loan in the future.
A key question will be around borrower sentiment towards paying a fee for service and how this could impact their choice to use a broker.
Brokers are being urged to share the survey with their clients by following the steps outlined here.
HashChing broker survey
The HashChing survey also asked brokers about their thoughts on general market conditions, including the trajectory of property prices, the nature of demand from clients and their expectations for changes to the official cash rate.
Almost half (48 per cent) of brokers agreed with research from global investment bank Morgan Stanley, which reported that property prices could fall by 15 per cent in 2019, while a third of brokers stated they have noticed an increase in home loan inquiries off the back of falling house prices.
“Interestingly, brokers are evenly split on whether house prices could fall by up to 15 per cent next year, as predicted by Morgan Stanley. This reflects the national voice of HashChing broker partners, who work closely with customers all around Australia and across the multitude of housing hotspots,” Ms Hayden said.
The COO added: “As anticipated, falling house prices have warmed the market, particularly in the lower end of the market. However, with the cash rate expected to increase next year, it will be interesting to see whether this demand continues.”
Further, over a third (39 percent) of brokers said they have noticed an increase in the volume of clients investigating refinance options in the lead-up to Christmas.
“The Christmas and New Year period is an expensive time of year and one that forces many of us to consider our current financial position,” Ms Hayden said. “The great thing is that it’s also a highly competitive season in the market – making it the perfect time to hunt around for a new home loan, or even help a loved one find the best rate on theirs.”
However, only 7 per cent of brokers stated they have noticed an increase in retirees inquiring about initiatives to access the equity in their home.
“In a context of growing household debt, the fact that so few retirees are looking at ways to access the equity in their home suggests that many are either unaware of the opportunity, or simply have too much debt to capitalise on it,” the HashChing COO stated.
Additionally, 10 per cent of surveyed brokers said they have had clients decide to take advantage of the first home super saver scheme (FHSSS).
“Given the $30,000 boost that the first home super saver scheme can offer, I am surprised more people aren’t accessing it. Although many factors come into play here, it does seem to reiterate a lack of financial awareness among young people in Australia coupled with the limitations of the super saver scheme.”
Moreover, 95 per cent of surveyed brokers correctly predicted the Reserve Bank of Australia’s decision to keep the cash rate on hold.
Just under half (41 per cent) of brokers said they expect the cash rate to increase in 2019.
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