The Australian mortgage provider has introduced the first of three changes to broker remuneration and business in a bid to “evolve industry practice and regulator expectations to deliver better customer outcomes”.
Following on from its previous communication to the market in April, Bankwest today confirmed that it has brought in changes to broker remuneration relating to the adoption of the Combined Industry Forum (CIF) recommendations.
“These are industry-wide changes that will be considered by all industry partners over the coming months,” the bank said.
“In response to the ASIC and ABA reports into mortgage broker remuneration, the CIF was established, with representatives from each aspect of the broker industry, to drive better customer outcomes through improvements to governance and remuneration practices.”
The CIF reform package has been designed to:
• ensure better customer outcomes;
• preserve and promote competition and customer choice; and
• improve standards of conduct and culture in mortgage broking.
Settlements from 1 July 2018 will receive an upfront commission of 0.7 of a percentage point. Trail commission for years one, two and three will be 0.15 of a percentage point, ramping up to 0.2 of a percentage point in years four, five and beyond.
The bank has also made changes to the way it calculates broker commissions.
New calculations will see upfront commission paid on the value of the loan limit disbursed (utilised by the customer) minus the value of any offset account balances. There is no change to construction loans or equity loans.
Six-month review period on upfront commission
A review period will be introduced six months after settlement has occurred.
“At this point, we will assess the value of the limit disbursed (utilised by the customer) minus the value of any offset account balances,” the bank said.
“If this figure has changed by $100,000 or more from the initial upfront commission calculation, then changes may be applied. Where the reassessed value of the loan is higher by more than $100,000 than at disbursal, we will pay a commission top-up. Where the reassessed value is lower by more than $100,000 than at disbursal, we will claw back the difference in commission already paid.”
The loan balance net offset at the review period is calculated using the highest average monthly loan balance, minus the average daily offset balance.
Equity loans will continue to have an existing 12-month review for upfront commissions on funds being utilised. Where less than 75 per cent of funds are utilised, the bank will amend upfront commissions by clawing back the difference.
Trail commission is currently paid on the average daily balance of the loan account. This calculation will continue; however, Bankwest will also consider the value of any offset account balances.
Commission impacts for top-ups (increase), redraws or additional lending
Bankwest said that there are three options available to the customer when they want to access additional funds after disbursal: top-up, redraw on an existing loan or additional lending through a new facility.
• Top-ups: Where the customer applies for an increase on their existing loan, upfront commission will be paid in the month following disbursal of the additional funds.
• Redraw: If a customer redraws on their loan within the six months following disbursal, upfront commission changes will be considered as part of the new six-month review period. Where the redraw occurs after this period, there will be no impact to upfront commissions; however, redraw will be considered as part of trail commission payments.
• Additional lending: If a customer applies for additional lending under a new facility, commission will paid as outlined here.
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[Related: Bank announces broker commission changes]