The Labor Party has recommended introducing a fixed rate for mortgage brokers in Australia, as a way of implementing the Royal Commission’s controversial recommendations at the same time as keeping brokers in business.
The original report recommended an end to lenders paying commission to mortgage brokers and said that instead, brokers should charge borrowers a fee. It was met with a furious response from brokers who argued that borrowers would not pay the fees.
Labor is proposing a flat commission rate of 1.1% of the property loan instead of the consumer-pays model favoured by the report. The news is significant, as Australia holds a federal election this year and opinion polling indicates Labor is a government in waiting.
The current government is yet to confirm whether it will implement the report’s recommendations and it could be months before they make an announcement.
Last week, it was reported that brokers were being offered mental health support, as they await a decision.
Labor’s shadow treasurer Chris Bowen has consulted with mortgage brokers and groups in a bid to find a compromise. Bowen believes a flat-rate broker commission will still achieve the goals of curbing conflict of interest, as recommended by the report.
He said: “We do want to see conflicted remuneration taken out of mortgage broking, but we do recognise that upfront commissions will play a role to take the financial pressure off customers.
“We have a different way of fixing that problem, and we do so very openly and transparently, waiting for an election to give the Australian people plenty of notice of our intentions and the mortgage broking sector the clear transparency of our approach.”
Australia is set for federal elections in May. Labor is hoping to oust current prime minister Scott Morrison and his coalition government. Latest opinion polling gives Labor a lead of around six per cent.