Macquarie to revise upfront commission model

At present, the bank calculates upfront commissions using the loan account balance (net of any offset account balances) as at the last day of the calendar month in which the loan is settled.

However, for new loans settled from 1 December 2019, upfront commissions will be calculated using the loan account balance (net of any offset account balances) as at the ninth calendar day post-settlement (tenth day of the loan).

“This change has been implemented to standardise the time period across all new loans, between loan settlement and the date for calculation of the upfront commission,” the bank told brokers.

Macquarie also reiterated that loan accounts on mortgages settled from 1 December 2018 will be reviewed at the end of the month following the 12-month period post-settlement, adding that it would pay an additional commission on the difference between:

• the current loan account balance (net of any offset account balances); and
• the loan account balance (net of any offset account balances) used in the upfront calculation, as long as the amount is greater than or equal to $50,000.

The first of such loan accounts are to be reviewed at the end of December.

Macquarie’s changes come amid continued debate surrounding the method in which upfront commissions are calculated, which resurfaced following the government’s decision to extend the proposed net of offset payment period from 90 days to 365 days.  

In the weeks following the publication of the government’s National Consumer Credit Protection Amendment (Mortgage Brokers) Bill 2019, industry leaders noted the impact of contrasting remuneration policies adopted by lenders off the back of the Combined Industry Forum’s move to limit the upfront commission paid to brokers to the amount drawn down by borrowers (net of offset).

Some stakeholders have warned that a disparity in the policies adopted by lenders could create lender-choice conflicts, while other have highlighted the impact of policy uncertainty on broking businesses.

Such concerns have prompted calls for the standardisation of broker remuneration policies adopted by lenders.   

However, others, including ANZ CEO Shayne Elliott, have resisted the push for standardisation.

Mr Elliott pointed to the perceived benefits of remuneration policy-based competition, stating that he has a “fundamental belief in the power of free markets”.

“It’s another tool that banks have to compete and differentiate themselves, and also hold brokers to account,” he said.

“I think there are pros and cons, but personally, I think a free market solution on pricing is, overall, a better outcome.”

[Related: ANZ CEO weighs in on broker rem reforms]