Brokers throughout the country heaved a sigh of relief last week as the opposition government shifted its original position on changes to broker remuneration.
Jamie McPhee, CEO of ME Bank said, “It’s terrific to see that both parties have acknowledged the important role that the mortgage broker plays in providing competition in banking. The [Labor party] believes that a lender-pay model will ensure that the competition remains. I think that’s a really, really positive outcome.”
MD of Trail Homes Nick Young agreed that it’s a promising start, but warned against accepting the latest development as a final outcome.
He said, “I think there’s a general feeling amongst some quarters of the industry that it’s all done and settled. It’s not. We’ve got a long way to go here.
“We’ve won the first battle, but this is a long campaign. It’ll take months or maybe even a year or two before we really get to the end of this process of settling the remuneration question in the industry.”
In Young’s opinion, a large portion of said battle lies in a general lack of understanding.
“This problem is very nebulous and nobody has actually expressed what it is or whether it even exists,” he explained.
“I think the industry, the politicians and the consumers, really need to carefully define what is the problem that we’re trying to address. If they can do that, then we can have the answer,” he said.
Without this being done Young worries the process will drag on as it is now with “everybody coming up with a myriad of solutions because there’s no one question that they’re trying to address.”
When he considers the viability of an all-upfront model, Young does not feel confident that it’s a neat answer to the issues.
When it comes to clarifying the driving principles, McPhee feels that it’s important to remember the original aim of Hayne’s commission. He views the purpose as “looking into the behavior of the banking system that wasn’t meeting community expectations to ultimately deliver a better customer outcome.”
McPhee believes that the key to doing this is through protecting and promoting competition in the industry. To this end, the Labor party’s announcement was sufficient in ensuring the “broker channel remains a viable channel going forward.”
Young has more reservations. In his opinion, both New Zealand and the Netherlands serve as models where meddling with the natural mortgage broker market led to overtly negative outcomes. “It’s more than it didn’t work, it was a disaster,” he claimed.
“My concern is that the more you artificially attempt to distort a marketplace, the more you disadvantage people. Whether they’re consumers, whether they’re lenders, whether they’re mortgage brokers, somebody is going to be disadvantaged.”
While there remains some dispute over the level of victory found in Labor’s repositioning, something everyone seems to agree on is that any major change to the remuneration framework needs to be clearly defined, thoroughly worked through, and implemented with great caution.