You may have seen the recent article in the Australian Financial review that took the side of the major lenders and pushed the arguments we’ve become familiar with.
There’s much to take issue with. For instance, the argument that the average mortgage size has increased with house prices – so that brokers are being paid more now for doing the same work to arrange a mortgage as they were 15 years ago – applies equally to lenders who earn a net interest margin on much larger mortgages for doing the same work.
Another point: The MFAA statistics quoted on average compensation to mortgage brokers is actually their gross revenue of which they have to meet their business expenses, so it’s wrong and deliberately emotive to compare it with salary.
This misinformation is then extended by drawing some conclusions about what larger than average mortgage brokers might be grossing – not their salary, their brokerage’s gross income – and then finishes with a cheap shot at John Symond and his house. Apart from being irrelevant to the story, it overlooks the fact that John Symond got all of his money from CBA buying him out.
The article also rolls out the tired old argument of the major banks that the brokers’ “…work is complete when the loan is arranged” and why should the broker “…continue to benefit from the loan for years to come”. This reflects the traditional view that brokers were simply an outsourced customer acquisition resource for the bank, and the borrower became the bank’s customer once the loan was settled.
That argument is simply unsustainable today. The reality is that the ‘last mile to the customer’ is the most important and influential part of the relationship, and this is where the broker plays the ‘trusted adviser’ role, including the life-of-the-loan assistance Hound enables.
Anya Pannek from the MFAA makes some good points – brokers are subject to Best Interest Duty (BID), and have access to a wide choice of lenders and their products – but unfortunately she focuses only on the service provided up to loan settlement, and overlooks the ‘life-of-the-loan’ assistance, which is what Hound enables.
Of course, the article doesn’t mention that lenders have no such BID obligation for their own networks selling their own mortgage products.
There is an implication in the article that what lenders pay brokers upfront and as trail is an extra cost they are forced to incur, whereas the truth of the matter is that a lender necessarily incurs costs to distribute its mortgages – either by paying brokers or covering the costs of its own network and staff members selling its mortgages.
It is a fair point that having different rates of upfront and trail commission creates the potential for conflict, and it would be better if there was not a disparity between lenders, but the article exaggerates when it says “…this is likely to sway the broker’s recommendations…”
The McKinsey Report referenced in the article seems almost naive in some of its comments, if they’ve been reported correctly: for example, why would it be ‘surprising’ that mortgage brokers would originate the majority of loans in many countries? With reports showing that 74.1% of all new home loans in Australia were written by mortgage brokers in January – March 2024, and brokers writing up to 75 per cent of home loans in the UK, it is a global trend, not a ‘surprise.’
The prominence of brokers has been driven by their ability to offer consumers greater choice, competitive rates, and personalised service. Unlike bank staff who can only offer products from a single lender, brokers access a wide range of lenders and products, creating the best fit for each client’s unique circumstances.
The rise of brokers in Australia – and the rest of the world – is not just a trend, but a reflection of the value they bring to consumers and the broader financial ecosystem. At a time when consumers are demanding more choice, personalisation and transparency, brokers are better placed than most to continue their growth in the Australian mortgage landscape.
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