How will the RC affect mortgage brokers and consumer enquiry? - Showtime Digital

How will the RC affect mortgage brokers and consumer enquiry?

06 March 2019 Read 343 times

What was Mr Hayne thinking?

We’ve recently seen the Hayne Royal Commission (RC) make some unusual recommendations regarding the mortgage industry. Surprising, considering the RC was meant to be an investigation into the banking sector.

It seems to have everyone but the banks, heated on the matter. Go figure.

Today mortgage brokers are considering what it may mean should up-front and trailing commissions be eliminated?

What I want to ask is how would these changes affect consumers.

We asked 3x mortgage broking firms and an off-the-plan residential property provider.

Voula KotsirasPort Group

Background: Voula has been in the industry for 18 years and has run Port Group for 11 of those. Port Group and its broker network rely on up-front and trailing commissions. Voula concedes that eliminating commissions would create a mass exodus of brokers from the industry.

Voula’s response: The Big 4 banks would need to employ brokers nationally throughout their reduced branch footprint, creating thousands of jobs and bringing in billions in revenue annually. The question is where are the banks going to find 27,000 in-store brokers to sign loans?

We speculated that bank shareholders would, in the short term, frown on the increase in payroll salary but enjoy the increased revenue and potential reduction in churn in the long term.

Anton Vdovin – Proper Finance

Background: Anton is the owner of Proper finance and has been in the game for nearly 16 years. With a focus on high net worth investors, in addition to up-front and trailing commission he also charges an upfront fee.

He believes if up-front and trailing commissions were eliminated 90% of brokers would close their doors.

He also believes only 10% of consumers would be willing to pay an up-front service fee to apply for a loan.

Bill NikolouzakisiBuyNew group

Background: Bill started as a mortgage broker at Westpac in 2003 and eventually set up Nyko Property, providing off the plan property to the investor market. More recently he heads up iBuyNew, an online portal for off the plan property on a national scale. 

He believes if up-front and trailing commissions disappear, mortgage brokers will require higher LVR’s to get a deal across the line.

He believes consumer advice and education on financial products will be slow to market and investors will have a reduced borrowing capacity and be forced to purchase lower priced investment property to build their portfolios.

How will the RC recommendations affect consumers?

If broker commissions are eliminated the consensus from our three industry insiders is the marketplace will dry up. With money being as tight as it is in 2019 it will only contract further. Consumers will be reticent to apply for a loan from a Big4 bank as their credit history and credit score will be affected each time. At least through the broker channel this information will be hidden until the right loan is found.

Will a consumer be willing to engage a broker for a minimum of $3000 upfront? When engaging a broker will consumers experience a bidding war in a race to the lowest quote?

For most, partnering with a large national aggregator will be the only option. Those brokers left will work on the bank’s payroll, refinancing for an award wage.

If an upfront fee of $6000 (a number touted by many commentators) is required, very few people will refinance. First home buyers will probably remain with their bank and fit into the bank’s product suite.

Churn will be a thing of the past and a state of financial fear will grip the economy.

If the old adage the more things change the more they stay the same’ is true then let’s hope the powers that be come to their senses.

Have your say by signing the behind your broker petition.

Steve Palmer

Steve Palmer is the Joint Founder and CEO of Showtime Digital. Steve has been in B2B sales since 1997 but influencing people and behavioural science has been a long-term passion.

The magic he brings to his clients is in knowing how to engage their audience. His goal is to help businesses understand the deeper reasons of why consumers convert online with them.