Mortgage brokers commission update

The re-election of the Government means that it will not implement the recommendation of the Financial Services Royal Commission in respect of mortgage broker commissions.

The Royal Commission recommended that

The borrower, not the lender, should pay the mortgage broker a fee for acting in connection with home lending.
Changes in brokers’ remuneration should be made over a period of two or three years, by first prohibiting lenders from paying trail commission to mortgage brokers in respect of new loans, then prohibiting lenders from paying other commissions to mortgage brokers.

Instead the Government’s position is that it will not prohibit trail commissions on new loans, but will rather review their operation in three years’ time.

This review will follow the introduction of a number of new measures including:

  • the best interests duty that will legally oblige mortgage brokers to act in the best interests of consumers;
  • a new requirement that the value of upfront commissions be linked to the amount drawn‑down by borrowers;
  • a ban on campaign and volume-based commissions; and
  • a two year limit on claw-back, starting from 1 July 2020.
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