James Frost & John Kehoe | The Australian Financial Review | 20 May 2019
Mortgage brokers are celebrating the re-election of the Coalition and the salvation of valuable trailing commissions that were poised to be banned under a Labor government.
Yellow Brick Road executive chairman Mark Bouris, who made pre-election robocalls to voters warning of the risks of Labor’s negative gearing changes, said the Coalition’s win would be good for YBR and other mortgage brokers.
“They are really energised,” Mr Bouris said. “The group’s distribution is extremely relieved that the Hayne royal commission recommendations will not be adopted when it comes to remuneration for brokers.”
Wollongong mortgage broker and industry spokesperson Katrina Rowlands said the opposition had underestimated the strength of the broker community. Ms Rowlands campaigned against the changes and described the election result as a great outcome for the industry and its clients.
“Hallelujah” Ms Rowlands said. “Very proud of our professionalism as an industry and proud to see so many that were happy to step forward and lead.”
The Coalition government chose not to follow a recommendation from the Hayne royal commission to scrap trailing commissions and stop the banks paying upfront commissions, instead choosing to review the model in three years.
Under a Labor government proposal trailing commissions were set to be banned from July 1, 2020. Labor planned to cap upfront commissions paid by the banks at 1.1 per cent of the loan amount drawn down by the borrower.
The mortgage broking industry criticised the proposal as unworkable, with many predicting massive job losses in the sector would follow. The mortgage broking sector rallied hard at the open, however the gains became more muted during the day.
Mortgage Choice shares closed 14.5 per cent higher, Yellow Brick Road shares closed 7.8 per cent higher and Australian Finance Group closed 6.7 per cent higher.
Finch Finance Group principal and mortgage broker Kat Skold recently left an established franchise to start her own business. She said brokers worked hard to get the best deal for their clients and their workload had increased four-fold since the royal commission began in February 2018.
“It’s a relief to know that the business and industry I have worked very hard at for 10 years isn’t going to be destroyed due to misunderstanding and manipulation of what we do, how we work as well as how and why we get paid,” Ms Skold said.
Ms Skold welcomed the election result, however she said there was still considerable uncertainty around what the model would look like ahead of the federal government’s review.
Mortgage and Finance Association of Australia CEO Mike Felton said the industry had much to do notwithstanding the stunning result. He said the industry would not rest on its laurels and needed to reform and evolve to meet customer expectations around transparency and education.
“We must continue to work through the remaining reforms” Mr Felton said. “We will also continue to work with ASIC and Treasury on the wide range of reforms proposed by the Hayne royal commission, particularly those where both the government and the opposition shared a common position.”