A Queensland-based bank has publicly defended broker commissions, adding that it does not support “increasing the costs for customers to obtain a home loan in the form of a customer-paid fee for service”.
Lenders and industry players are continuing to release their reactions to the final report from the Royal Commission into Misconduct in the Banking, Superannuation and Financial Services Industry, with Toowoomba-based Heritage Bank becoming the latest lender to defend the lender-paid commission model.
Heritage Bank CEO Peter Lock has said that while the royal commission recommendations around changing broker remuneration may be “well intended”, he added that they could result in consequences that ultimately leave the customer in a poorer position.
As such, Mr Lock urged the federal government to proceed with “great care” when considering how these recommendations could be implemented to ensure that the “spirit” of the changes are put in place without severely affecting the broker industry.
Commenting on the impact of a ban on broker commissions, Mr Lock said: “We do not support increasing the costs for customers to obtain a home loan in the form of a customer-paid fee for service and worsen the current affordability crisis for those customers already struggling to afford a home.
“Nor do we condone the significant impact to competition that these measures are likely to create,” he said.
“It is crucial that we maintain competition in the sector. The royal commission recommendation would create severe challenges for the broking industry and give more power back to the major banks.”
Mr Lock added that the broker channel was “vitally important” for smaller lenders that do not have the large distribution footprint of the major banks, noting that Heritage relies on brokers to grow its member base nationally, particularly outside of Queensland.
“A major contraction of the mortgage broking industry would reduce competition and put the big banks in an even more powerful position in the home loan market,” he said.
“We are a regionally headquartered bank, based in Toowoomba, and understand the importance of brokers in both regional areas as well as in capital cities in being able to support consumers’ access to competitive home loans.”
The bank CEO concluded: “Heritage Bank is committed to supporting the mortgage broker channel, and we will continue to work with all industry participants to lobby for competition and viability of the broker channel to be maintained.”
Mr Lock’s comments echo those made by several other non-major lenders recently, with the chief executive of P&N Bank, Andrew Hadley, also calling for caution around the implementation of Commissioner Kenneth Hayne’s recommendations, while ING’s head of distribution, Glenn Gibson, recently commented: “We believe policymakers need to be very cautious in considering change to make sure brokers are able to continue to support competition and deliver for borrowers.”
Annie Kane is the editor of The Adviser magazine, Australia’s leading magazine for mortgage brokers.
As well as writing news and features on the Australian mortgage market, financial regulation, fintechs and the wider lending market – Annie is also the host of the Elite Broker podcast and regulator contributor to the Mortgage Business Uncut podcast.
Before joining The Adviser team at Momentum Media in 2016, Annie wrote for a range of business and consumer titles, including The Guardian (Australia), BBC Music Magazine, Elle (Australia), BBC Countryfile, BBC Homes & Antiques, and Resource magazine.
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