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2018: Year in review

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Tas Bindi 10 minute read

It has been an eventful year for brokers - and the broader financial services industry - with numerous investigations taking place to identify how competition and lending practices can be improved. The Adviser looks back at the biggest events that shaped the Australian mortgage industry in 2018.

January to June 2018

After the Royal Commission into Banking, Superannuation and Financial Services Industry claimed in a paper that 12 per cent of submissions were related to the conduct of mortgage brokers, Queensland broker Nicki McDavitt notified The Adviser of a flaw in the royal commission’s form.

Specifically, the form neglected to include a section for misconduct relating to mortgages for anything other than brokers, meaning that the submissions received could relate to both brokers and banks, and could be skewing the figures unfavourably against brokers. The royal commission subsequently updated the form.

The first round of RC hearings kicked off in March, where lender-paid broker remuneration came under scrutiny due to the perception of it being at odds with customer interests.

The Productivity Commission (PC) similarly raised concerns over “conflicted” broker commissions in its draft report on competition in the Australian financial system, as well as the “lack of borrower awareness” of broker remuneration structures and the “lack of a legal duty of care” by lender-owned aggregators and brokers operating under them. It commenced public hearings to investigate these issues further.


The first half of the year also saw:

  • The release of Federal Budget 2018–19 in May, with the budget confirming that the measures to unlock the supply of affordable housing are “on track”, including the $1 billion National Housing Finance and Investment Corporation and the release of more land suitable for housing.
  • The proportion of loans written by the third-party channel in the March quarter reaching its highest figure, at 55.3 per cent, according to the MFAA and CoreLogic.
  • APRA conditionally removing its 10 per cent benchmark on investor loan growth.
  • ASIC revealing that it would be undertaking a shadow shopping exercise to find out whether “broker advice” results in “positive
    consumer outcomes”.
  • Law firm Chamberlains revealing that it was planning a multibillion-dollar class action suit on behalf of borrowers that incurred losses by entering into mortgage finance agreements.
  • Westpac Group, ANZ Bank and CBA updating their expense verification processes.

July to December 2018

During the second half of the year, the Productivity Commission released its final report on competition in the financial system, recommending that trail commissions be abolished.

The PC pointed to a belief that these commissions were a conflicted form of remuneration that creates “perverse incentives” for brokers by “rewarding” them for keeping customers in their current loan — a view that was similarly held by the NSW government, but not the federal Department of Treasury.

Meanwhile, the Combined Industry Forum’s interim report was released in August, outlining the progress the group had made in introducing reforms such as moving to a new upfront commission model based on drawdown amounts and the removal of volume-based bonus commissions and “soft dollar benefits”. NAB was the first major bank to implement the upfront change, while Westpac Group followed in close pursuit. The CIF also noted progress in its drafting of the Mortgage Broking Industry Code of Conduct and potential sanctions for breaches.

Also in August, a Liberal leadership spill saw Malcolm Turnbull replaced by former Treasurer Scott Morrison as the 30th Prime Minister of Australia.

The Mortgage Broker Forum, a group of 11 broking firms, handed a report to Treasury in September, putting forward six recommendations to “sharply improve” governance in the broking sector, drawing from previous reports by ASIC, the CIF, the PC and Deloitte Access Economics.

Recommendations include the development of Registered Credit and Compliance Holders (RCCH), which would expand an aggregator’s role so that they are responsible for the behaviour and compliance of their broker network. It was suggested that the RCCH be overseen by ASIC.

The royal commission also released its interim report in September, stating that there was “no reason to doubt” the findings of ASIC’s review of mortgage broker remuneration, nor was there any reason “to doubt that value-based upfront and trail commissions to third parties contribute to those outcomes”.

However, it suggested that the current broker remuneration structure could be in breach of the NCCP Act.

Commissioner Hayne voiced concern over the impact of accreditation requirements on broker behaviour and the lack of clarity on the roles mortgage intermediaries fulfil, while questioning the longevity of the HEM benchmark and criticising ASIC’s response to misconduct.

In other news in the second half:

  • Aussie CEO James Symond brought together some of the broking industry’s biggest businesses and federal Treasurer Josh Frydenberg to discuss issues affecting the broking industry.
  • ANZ, CBA and Westpac hiked their variable home loan interest rates out of cycle, attributing their decision to higher wholesale funding costs, while NAB decided to keep its rates on hold.
  • ANZ, CBA, NAB, Westpac and AMP withdrew from SMSF lending.
  • Kalgoorlie-based bank Goldfields Money and Sydney-based finance aggregator Finsure merged.
  • The Morrison government’s plan to fast-track small business tax cuts by five years passed the Senate in October.
  • ASIC stated that as part of new credit card reforms, credit licensees undertaking responsible lending assessments for “other credit products”, including mortgages, should ensure that the consumer “continues to have the capacity to repay their full financial obligations” under an existing credit card contract within a “reasonable period”.
  • New EDR body AFCA began operating at the start of November.
2018: Year in review
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Tas Bindi

Tas Bindi

Tas Bindi is the features editor for The Adviser magazine. 

Prior to joining Momentum Media, Tas wrote for business and technology titles such as ZDNet, TechRepublic, Startup Daily, and Dynamic Business. 

You can email Tas on: This email address is being protected from spambots. You need JavaScript enabled to view it.


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