Royal Commission changes to mortgage broking would have negative outcomes for consumers

 Industry urges the public to help keep lender competition alive


The Mortgage & Finance Association of Australia (MFAA) and a coalition of industry partners have launched a national campaign to remind Australians what a world without brokers would look like.

Recommendations made by the Royal Commission earlier this month regarding changes to the way mortgage brokers are paid, could dismantle the mortgage broking industry and have unintended but harmful consequences for consumers.

The proposal is for a ban on commissions for mortgage brokers and an upfront fee for borrowers when they take out a loan. If these changes are implemented by the government, there will be a number of important ramifications for all parties – lenders, brokers, and consumers – with consumers well and truly getting the short end of the stick.

How will the mortgage broking industry be affected?

Brokers earn on average $86,417 before tax and many are small business owners.* A ban on commissions would reduce broker income and challenge the viability of their business.

Currently, it is lenders who pay mortgage brokers for arranging a loan. However, the recommendation is that borrowers would instead pay an additional fee whether they borrow through a broker or directly from the lender. According to a recent survey, 58 percent of respondents would be unwilling to pay any broker fee at all, and only 3.5 percent of consumers would be willing to pay a fee of $2,000 or more.**

According to Peter Swan of Smartline  “Essentially, the model proposed by the Royal Commission is likely to result in thousands of brokers being forced out of business, which will leave Australian borrowers with significantly fewer options.”

How will this affect consumers?

A lack of mortgage brokers means competition from second-tier lenders would decline as many smaller lenders do not have a branch network and rely on brokers to provide a lending channel.  Access to credit, particularly for regional and rural borrowers and those with complex financial needs, would be severely impacted. Reduced competition and choice for borrowers will hand power back to a handful of large lenders and over time interest rates are likely to increase.

The significant upfront fee would be an additional cost for borrowers. It would also further entrench bank power by making it financially unattractive to refinance with a different lender.

Ultimately, consumers would have less choice, less access to credit and higher borrowing costs.

How has the industry responded?

According to Mike Felton, CEO of the MFAA, “Consumers can rightly feel disappointed at the outcome of the Royal Commission. [It] was set up to protect them from big bank power but has simply entrenched it further. … A massive new bank fee added to the cost of buying a home cannot be a good outcome for Australians.

“As reviews by ASIC, the ABA and the Productivity Commission have found, brokers, drive competition by providing a shopfront for smaller lenders … [Mortgage brokers] are critical to the health of Australia’s mortgage lending market,” Mr Felton said.

Smartline’s Peter Swan agrees. “If any changes are to be made, they should be made with consumer outcomes as the top priority. This means competition, choice, and access to credit must be kept alive. Destroying the broker channel does just the opposite, resulting in increased borrowing costs for consumers.”

It’s not just the mortgage industry who is concerned. Treasury’s submission to the Royal Commission’s Interim Report recognised that a lack of mortgage broking activity could have a significant detrimental impact on competition, with the beneficiaries being the major banks.

Prime Minister Scott Morrison last week publicly recognised that the proposed changes would hurt consumers. He said any changes must be made in consultation with the industry and that Australians should have access to mortgage broking services.

What can the public do to protect their interests?

While both sides of government have said industry consultation is essential before any changes are implemented, we believe that there is more to be done in ensuring decision makers at government level – and in fact, all Australians – are aware of the detrimental effect the changes could have for consumers.

The public can voice their concerns by being involved in the industry campaign, Broker Behind You. They can sign the petition here:, and enter their postcode to contact their Federal MP.***


About Smartline

Established in 1999, Smartline is a multi award winning franchised mortgage broking group with a reputation for quality advice and outstanding client care. Smartline has been named Australia’s number one franchise by, an independent research group, the last nine out of ten years.

Smartline’s 300-plus advisers settle $6 billion annually in home loans, with 85% of Smartline’s business coming from a personal recommendation. Smartline has donated more than $1.8 million to charities across Australia.

Australian Credit Licence Number 385325


*According to Deloitte Access Economics

** Independent research released in January 2019 from a survey of around 5,800 Australian broker and bank customers who said they intend to use a mortgage broker in future.

***This campaign was funded by the MFAA, AFG, Connective, Loan Market, Aussie, Mortgage Choice, Choice Aggregation, Fast, Plan Australia, Smartline, Specialist Finance Group, Astute Financial, National Mortgage Brokers, Pepper Money, Finsure Finance and Insurance, Liberty, NextGen.Net, Resimac Group, ALI Group and Bluestone.