Access to finance is important for property investors, and if elected, Labor’s response to the banking royal commission report could have an impact on that. Property experts weigh in on what Labor’s commitments mean for investors.
On Friday, the Labor party announced it would implement 75 out of 76 recommendations from the banking royal commission report. The federal opposition has backed away from a consumer-pays model, as recommended by Commissioner Kenneth Hayne, and is calling for a lender-paid standardised flat fee.
Shadow treasurer Chris Bowen believes the fixed fee will remove conflicts of interest from lenders with differing commission rates.
The Labor Party had previously expressed “in principle” support for all 76 of Hayne’s recommendations, which would include a ban on a lender-paid commission-based remuneration to brokers.
However, following widespread campaigning and lobbying by industry on the risks that Commissioner Hayne’s consumer-pays-fee recommendation poses to the viability of the broker channel and to competition in the lending market, Labor has softened its position. You can read more about the concerns property experts have for Hayne’s recommendations here.
“Labor will deal with the royal commission’s key concerns with mortgage broker remuneration, namely conflicted remuneration and incentives that drive higher average loans sizes that may not be in the consumer’s best interests,” Mr Bowen said in a statement.
As Labor’s response backs away from the measure that many experts see as disastrous to securing finance, mortgage broking firm Mortgage Choice’s CEO Susan Mitchell welcomed the announcement but said there was further need for more information to fully assess its impact.
“It’s wonderful that Labor has reconsidered consumer-pays. They’re recognising how important brokers are for competition,” Ms Mitchell told Smart Property Investment.
“That’s got to be great for anyone buying a home. It makes you feel comfortable that they’ll continue to be competitive pricing, continue to be brokers that can help your customers… [with] the opaque pricing here in Australia, and help you find the best loan.
“I realise these things take time, so it’s great that they’ve made this step. It’s fantastic. I don’t want to sound in any way supportive of that because it is great, but of course, it’s just the beginning.”
She added that it was great that, for the most part, both of the major parties are receptive to the importance of brokers for competition.
“I’m glad Labor has come round, and the Liberal Party was already in that position, so I think that’s wonderful that they are both willing to make this change,” Ms Mitchell said.
“I know they’re both supportive of implementing the royal commission. I think it’s great that they’re willing to come out and make this change for the consumer.”