We’ve had a week now to absorb the final report from the ‘Hayne Royal Commission into Misconduct in the Banking, Superannuation and Financial Services Industry’. Now that some of the dust has settled, and people have had a chance to consider what that report actually said, we thought it was time that we looked at what impact the Banking Commission may have on the day-to-day activities of everyday home owners around Melbourne.
Since the report was released there have been quite a few commentators, (not to mention lots of everyday Australian consumers), who have been asking whether the Banks have been let off lightly. Given the fact that the share prices of all the Big Four Banks rose after the release of the report, and the fact that none of the leaders of those banks have been charged with anything as a result of the inquiry, that sounds like a reasonable question, doesn’t it?
From our point of view here at Ian Reid Vendor Advocates, a more relevant question seems to be why the Banking Commission chose to target Mortgage Brokers so pointedly, to the extent that many of these independent business people are now facing financial disaster.
If you are unfamiliar with the work of the Mortgage Broking sector, it is worth noting that close to 60% of all home loans approved in 2018 were sourced through a Mortgage Broker. What’s more, an independent study by Corelogic found that over the past five years, Mortgage Brokers have reduced that the dominant power of the major lenders by increasing competition in the home loan market, increasing the proportion of home loans that are sourced from the smaller lenders.
When you consider that the Royal Commission was supposed to be examining the power of the major lenders and their ability to control the lending market through that dominance, you could well be asking whether they have missed the main target.
Here at Ian Reid Vendor Advocates we have long been supporters of the benefits of dealing with an independent Mortgage Broker, whether as a home buyer or as a home owner looking at refinancing. Of course, one of the key benefits of using a Broker has always been that their service and advice hasn’t cost you anything, as their fees are paid by whichever Bank you obtain your loan from. So the recommendation that the borrower should now pay for the Broker, rather than the Bank, is sure to discourage home buyers from using a Broker…which will inevitably mean more borrowers end up paying more for their home loans as they will never get to hear about the special deals that brokers are able to source from the smaller lenders.
As a business that has built its reputation on a focus on providing clients with advice and guidance that is objective and protecting, the apparent determination by the Royal Commission to reduce competition between mortgage lenders seems very short-sighted indeed.
Of course, avoiding paying too much for your mortgage is just one of the expensive mistakes that home owners can make. If you’d like to avoid making even more mistakes when you sell, be sure to get your free copy of our booklet, Fatal Real Estate Traps Exposed, while you’re here.