Major bank to change commissions next year

Effective from 1 January 2019, ANZ has said that upfront commissions will be based on the drawn amount, net of redraw or linked offset funds paid out of the principal.

Payment will be made by the 15th day of the month.

Further, the major bank has said that top-up (utilisation payments) will be made monthly for the first 12 months, based on subsequent utilisation of those redraw or offset funds.

Speaking earlier this year during a parliamentary committee hearing in Canberra, ANZ CEO Shayne Elliott said that remuneration reform is “worthy of discussion” but warned: “My only caution is that no system is perfect, and any system will have potentially unintended consequences”.

He continued: “I think the [broking industry and regulators] can sit down and consider improvements to that model. But as of today, we think they perform a valuable role that consumers actually prefer and choose to increase the amount of business they give to brokers every year.”

Timeline of major bank commission changes

All four major banks have committed to adopting the new commission structure, which come off the back of the recommendations from the ASIC and Sedgwick reviews, and were largely backed by the Combined Industry Forum package of reforms.

While Bankwest was the first lender to bring in the new commission structure (bringing it into being on 1 July 2018), NAB was the first major bank to move to the new commission structure, with both NAB (and its wholesale funding business, Advantedge) moving to the new payment model last month.

NAB and Advantedge have stated that should a customer retain funds to be used at a later date, they will pay upfront commissions on the subsequent drawdown amount (i.e. on loan funds used after the initial drawdown), net of any linked offset facility, provided the initial settlement occurs after Monday, 12 November 2018, and the subsequent drawdown:

1. Occurs on or after the sixth calendar day following the initial drawdown date; 
2. Occurs within 12 months of the initial drawdown date; and
3. Is for an amount equal to, or greater than $20,000, up to the maximum loan split limit.

NAB and Advantedge also said that the maximum commission payable for a subsequent drawdown “must not exceed the commission that would have been payable if the loan account was fully drawn as at five calendar days after the initial settlement date”.

The Commonwealth Bank of Australia (CBA) implemented its changes a few weeks ago, calculating upfront commission for new home loans based on the drawn down loan balance, net of any linked offset account and redraw facility for new loans settled as of 24 November.

The calculations are now based on the 14th calendar day after the date of the drawdown to ensure that brokers are “remunerated appropriately” (i.e. after the customer has drawn down their funds).

Similar to ANZ, Westpac and its subsidiaries (St. George, Bank of Melbourne and BankSA) have also committed to implementing the new commission structure from the start of the calendar year.

The group will therefore be linking upfront commission payments for standard home loans to net debt utilisation and inclusive of loan offset arrangements, rather than the approved loan limit, from 1 January 2019.

Westpac also stated that the new commission structure for standard home loans would allow for a subsequent upfront commission for when brokers arrange loans for customers with funds held in offset accounts for a short-term future purpose like renovations.

The CIF recently hosted an event that further outlined its work on mortgage broking reforms and reiterated that lenders are expected to make the remuneration changes by December 2018.

Indeed, just yesterday (5 December), Suncorp confirmed that it would be changing broker upfront commissions for new home loan settlements from 1 January 2019.

Other lenders that have committed to the reforms include Adelaide Bank, AMP Bank, ING, Macquarie Bank, ME Bank, and MyState Bank.

[Related: Non-major bank changes broker commissions]