Recent comments made at the Royal Commission into Misconduct in the Banking, Superannuation and Financial Services Industry by CBA Chief Executive Matt Comyn have major ramifications for borrowers that chose to use a mortgage broker.
Mr Comyn, who was questioned by the Royal Commission regarding CBA’s misconduct last month, suggested that mortgage borrowers should pay a fee to a mortgage broker for their service rather than the broker being paid a commission by the lender.
Brokers currently generally provide the borrower with a free service, with a commission paid to the broker once the loan settles.
Broker originated loans now account for around 55 per cent of all mortgages and it is the growth of this channel that has been credited with driving significant competition into the mortgage market.
CBA has the lowest share of broker originated loans and the largest retail branch network.
There are significant fears that should brokers have to charge the borrower a fee, demand for brokers would drop, and so too would competition. Borrowers could once again be forced to chose between a handful of retail banks.
Smart Property Investment has commissioned report to understand the decisions behind how borrowers chose their mortgage provider, what their sentiment and understanding was around commission and, importantly, what would influence their decision when choosing which distribution channel they would use for a home loan in the future.
According to Alex Whitlock, director – mortgages at Momentum Media – the business behind Smart Property Investment – a key question will be around borrower sentiment towards paying a fee-for-service and how this could impact their choice to use a broker.
“It is essential that borrowers have access to the widest possible range of lenders and products, ensuring robust competition in the mortgage market.
This will ensure that mortgages are ultimately offered at the lowest sustainable margin by lenders.
“If we end up being forced to use the lender with the biggest retail network, history tells us that the cost to borrow will increase for the borrower.”