Analysis in the report argues most existing mortgage-broker customers would not use the services if they had to pay, and would return to lenders with the biggest branch networks: Commonwealth Bank and Westpac.
“This would significantly reduce the reach of smaller banks and lenders that have been able to compete with the major banks via the mortgage-broker channel,” the report said. “A reduction in competition and subsequent diminishing market share for smaller lenders would empower the biggest institutions to increase their margins and reduce their product range.”
But the report also indicates many mortgage-broking customers do not see value in the services brokers provide, which could cause more headaches for the industry.
A so-called “Dutch model” — requiring banks also to levy an equivalent fee on their customers — could reduce the potential for a customer-pays model to shift borrowers to bank branches.
According to the Australian Securities and Investments Commission, the average upfront commission paid to a broker is 0.54 per cent of the value of a loan, or $2000 on the average loan size of $371,000. Brokers would earn an another $2000 in trailing commission over four years, at the market average of 0.18 per cent.
Deloitte found last year a broker working independently as an individual sole trader reported average earnings before tax of $86,417.
The Momentum survey found just 3.5 per cent of customers would be willing to pay the $2000. However, some would be willing to pay smaller fees: 11 per cent said would pay $1000, and 42 per cent said would pay $100.
In a report on Thursday, JP Morgan banking analyst Andrew Triggs said he expected the final report of the royal commission to ban mortgage broker trailing commissions — an annual fee paid over the lifetime of the mortgage — but to keep value-based, upfront commissions.
from Just News Viral http://bit.ly/2Wwh0jW
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