A national campaign has been launched by a coalition of industry players to demonstrate the competition and choice that brokers provide and outline what the landscape would look like without brokers.
The Mortgage & Finance Association of Australia (MFAA), along with several aggregators and lenders, have launched a national campaign that will run across television, media and radio to remind borrowers the value that mortgage brokers provide in providing competition, choice and access to credit.
The “Don’t Kill Competition” campaign aims to demonstrate to a mass audience the negative ramifications of potential policy changes that could be brought about as a result of the the recommendations from the financial services royal commission.
The final report from the Royal Commission into Misconduct in the Banking, Superannuation and Financial Services Industry recommended a ban on all commissions being paid by lenders to brokers.
While the government has said it will look to ban trail commissions next year, Treasurer Josh Frydenberg appears cognisant of the major ramifications that moving from a lender-paid commission structure to a consumer-paid fees model could have on industry.
The Treasurer has therefore said that government should look at the feasibility of moving to a consumer-pays model in three years’ time. However, there are concerns that should the upcoming election result in a change of government, the incoming party may not uphold that decision and move to this model immediately (given that Labor has suggested it would implement all 76 recommendations).
Given recent research around consumer attitudes on changing a free service to one they need to pay for, there are major concerns that such a model would decimate the viability of the broking industry.
Given the wholesale changes that these recommendations could have on industry – and for Australian borrowers as a whole – the broking industry has therefore now launched a major advertising campaign to show Australians what a world without brokers would look like.
MFAA CEO Mike Felton said the blanket ban on commissions, starting with the removal of trail from July 2020, would significantly lower broker remuneration, have a devastating effect on the broking industry, kill competition and drive up the cost of borrowing for millions of Australians.
“Consumers can rightly feel disappointed at this outcome of the royal commission,” Mr Felton said.
“The recommendations on brokers represent a massive win for the big banks.
“The royal commission was set up to protect them from big bank power but has simply entrenched it further. How mortgage brokers can be front and centre of the recommendations is inexplicable to me. A massive new bank fee added to the cost of buying a home cannot be a good outcome for Australians,” he added.
Mr Felton noted that reviews and inquiries held by ASIC, the ABA and the Productivity Commission over the past few years have noted that brokers drive competition by providing a shopfront for smaller lenders, particularly for rural and regional customers.
“We are critical to the health of Australia’s mortgage lending market,” Mr Felton said.
“Mortgage brokers now originate 59.1 per cent of all mortgages in Australia, and more than half a million home buyers use a broker each year.”
The head of the MFAA highlighted that much of the growth in broker market share has come from small and regional lenders, which increases competition and helps place downward pressure on interest rates.
“We believe significant policy changes must hold competition, consumer choice and access to credit for marginalised groups as the highest priority, to protect outcomes for consumers.
“I fail to see how decimating the broker channel, leaving Australians with a handful of lenders to choose from, is good for competition, or good for customers,” Mr Felton said.
As well as illustrating to borrowers the value proposition of brokers and highlighting the wide choice of lenders that brokers can access, the Don’t Kill Competition campaign calls on borrowers to write to their local representatives to voice their support for the broker channel, which they can do via the brokerbehindyou website.
“We are launching a national advertising campaign this week, and we are calling on everyday Australians to join us in a grassroots campaign to protect competition by letting their local representatives know they support the broker channel,” Mr Felton said.
“Consumers can visit our Don’t Kill Competition campaign website to register their support with their local MP.
“I urge all Australians to [visit the website] and show support for an industry that underpins and helps sustain our entire home lending market,” he added.
“In short, without mortgage brokers, finding a home loan would be harder and more expensive for all Australians.”
The major campaign follows on from a slew of advertising and social media campaigns being run by aggregator groups, lenders, brokerages and individual brokers too.
It is hoped that by clearly demonstrating the value of the broker channel, and by showing the negative outcomes that changing broker remuneration could have, legislators will be able to make a well-informed decision on broker remuneration moving forward.
The 'Don't Kill Competition' campaign is being spearheaded by the MFAA with support from AFG, Connective, Loan Market, Aussie, Mortgage Choice, Choice Aggregation, FAST, PLAN, Smartline, Specialist Finance Group, Astute Financial, nMB, Pepper Money, Finsure, Liberty, NextGen.Net, Resimac, Ali Group and Bluestone.
Find out more about what the final report from the Royal Commission into Misconduct in the Banking, Superannuation and Financial Services Industry means for the broking industry, and what the next steps are, by attending the Better Business Summit 2019.
Running across five different states every Thursday from 14 February, the Better Business Summit provides brokers with straight-talking, practical advice to help them grow and improve their businesses in this time of change.
Tickets are selling out – so make sure you secure your ticket today to stay ahead of the curve and prepare your business.