Impacts of the Royal Commission

Update - 24 May 2019

With the Coalition victory in the Federal Election now confirmed as a majority outcome the effect is that there will be no changes made to Mortgage Broker remuneration (i.e. commissions) until at least after the (yet to be confirmed) review in about 3 years' time.

It appears more likely that any significant changes may occur only after the next Election.  However, with both Major Parties having considerably recanted their commitments to fully implement the recommendations of the Royal Commission ahead of the Election, it seems that the status quo will be maintained for the foreseeable future.

The current Government continues to insist that it will legislate for a Mortgage Broker "best interests" obligation.  However, in an industry with significant ownership and licensing conflicts - and entirely conflicted remuneration structure - it is difficult to see how this 'legal fiction' can be enshrined in legislation. 

What we will end up with, if anything at all, will be some sort of watered down 'safe harbour' requirement that will almost certainly be at an even lower bar than has already been set within financial planning.

Update - 12 March 2019

In an announcement on Tuesday (12 March 2019 ), Treasurer Josh Frydenberg said that “following consultation with the mortgage broking industry and smaller lenders, the Coalition government has decided to not prohibit trail commissions on new loans but rather review their operation in three years’ time”.

At this stage the Opposition has not re-affirmed its position but had earlier stated that it would ban trailing commission from 1 July 2020 (as had the current Government).

Both the current Government and the Opposition had previously chosen to ignore the Commissioner's recommendation for a phased-in ban on all commissions (specifically upfront commissions).

So - at this stage this remains the only recommendation from the Royal Commission that both sides of politics have chosen to either partly or wholly ignore.

This also means that for the foreseeable future Mortgage Broker remuneration will remain conflicted and this Company will remain as Australia's only trusted source of truly independent mortgage advice.
5 February 2019:    The following is a statement by our Managing Director about the Recommendations of the Royal Commission, and subsequent announcements by the Treasurer, in relation to the remuneration of mortgage brokers. 

Importantly, the Royal Commission has noted that best practise in the mortgage broking industry would necessitate a model such as that being used by Independent Mortgage Planners for nearly the past decade.  That is, removal of conflicted remuneration coupled with an obligation to act in the best interests of Consumers.

Although the Government has stated that it will look to implement all recommendations made by the Royal Commission please note that:

  • At this stage the Government is only looking to ban trailing commission;

  • That ban is currently set to commence on 1 July 2020;

  • The ban will only be on new loans from that date and should not be retrospective;

  • Therefore, we see no impact on our Clients’ existing trailing commissions.

Going forward the Government has said that it will review upfront commission payments to Brokers in about three years.  One assumes that is three years after 1 July 2020.  Of course a future Government may choose to amend that timeframe.

Independent Mortgage Planners’ position is very clear – and most importantly has not needed to change as a result of the Royal Commission as noted above:

  • We exist to provide truly independent mortgage advice and act in the best interests of our Clients;

  • Any and all commissions we are entitled to are rebated to Clients in full;

  • Should any Government eventually decide to ban all forms of conflicted remuneration for mortgage brokers (i.e. commission) that is ostensibly a good thing;

  • Removal of commissions must logically mean that the majority of Lenders will reduce the interest rate on new loans via the Broker Channel as a result of their significantly reduced acquisition costs.  We will certainly be working with Lenders to ensure this happens;

  • Our role will still be to provide expert and independent advice and assistance; and

  • We will continue to identify the genuinely lowest cost outcome for our Clients, improve upon the home loan/s they already have (or can source elsewhere), and continue to back that up with a Fee Guarantee.

Obviously, there is still a lot of water to flow under the bridge before any changes become law.  Industry lobby groups are already hard at work to have the government back down, or water down any new legislation.

There will inevitably be a lot of ill-informed speculation, media reporting, blogs etc.  We can almost be certain that eventual legislation, once enacted, may be different than current Government announcements.  With elections scheduled for May 2019 there is, of course, no certainty that the current Government will ultimately be the one that implements the recommendations of the Royal Commission.

Probably the only certainty is that there will be change.

We will update this Page from time to time as new, and confirmed, information comes to hand.