Will lenders crack down on broker commissions?

The latest roundup of royal commission survey predictions suggest both challenges and opportunities for brokers ahead

By Otiena Ellwand

05 Jun 2018

Here’s the latest roundup of royal commission survey predictions, which suggest both challenges and opportunities for brokers ahead.

“68% of respondents believe that major lenders will clamp down on broker commissions in wake of the Royal Commission” -HashChing survey of its broker network

“The knock-on effects of the royal commission are starting to rear their ugly head. Most brokers believe that the major lenders will clamp down on broker commissions – an issue that means brokers will need to explore ways to scale their business and ensure their business systems create efficiencies,” said HashChing COO Siobhan Hayden.

But while there will be more pressure on brokers to meet the banks’ stricter lending requirements, borrowers will need the assistance of a broker more than ever to make sense of it all, she said.

In a separate statement about misconduct in the financial sector, Deakin Law School professor Gill North, a chartered accountant and financial analyst, said changes to the way brokers are remunerated and the processes used by lenders to verify information provided by the third party is inevitable.

She predicted that there will be more litigation cases brought forward as a result. “Actions by consumers who were issued loans or provided financial advice in breach of the law are likely to accelerate, and become a flood of litigation as the circumstances in Australia deteriorate and household financial stress levels climb to new records,” North said.

This has already happened with Canberra law firm Chamberlains announcing work on a class action lawsuit on behalf of Australian bank customers who allege financial loss as a result of their mortgage contracts.

“93% said they have noticed banks are examining borrower finances far more closely in the last month” -HashChing survey

Hayden recommends ensuring client conversations are broad and accurately capture all their needs. The relationship needs to be collaborative to be effective, and that may mean relying on better technology that includes the customer in the lending journey, she said.

“The ability for brokers to service more clients in less time, without impacting their quality of service, is crucial.”

“7 in 10 brokers said more customers have been enquiring about using non-bank or alternative lenders in the last month” -HashChing survey

With the major lenders facing intense backlash for dodgy lending practices, Hayden said borrowers are now more open to using alternative lenders.

“There’s definitely a greater opportunity here for brokers to explore the home loan options being offered by the smaller and non-bank lenders on behalf of their clients,” she said.

“83% of respondents believe banks will operate to a higher moral standard but nearly half of these respondents (39%) think this will be short-lived” –Finder.com.au survey of experts and economists

With the banks’ bad reputations making headlines nearly every day, some experts believe this will prompt a systemic change.

“It’s encouraging that many expect banks to step up and raise the moral bar, but whether or not this will be sustainable is another question,” said Graham Cooke, insights manager at finder.com.au.

“In the coming months, we may see a rise in the number of bank customers switching or refinancing if they feel they’ve been wronged or if the trust is broken with their existing provider.”