Property investors will lose a key partner in strategy and experience, and end up paying more, should the recommendations to change mortgage broker remuneration go through, experts fear.
The Property Couch co-host Ben Kingsley, who is also chair of the Property Investment Professionals of Australia, said that if Commissioner Hayneâ€™s recommendation for a borrower to pay the broker a flat fee for arranging a loan kicks in, there would be a significant lack of competition for the banks because consumers would be driven away from paying more.
â€œItâ€™s as clear as day in terms of the cost-effectiveness of having competition in a marketplace meant that borrowers pay less. Thatâ€™s a great consumer outcome,â€ said Mr Kingsley on the Smart Property Investment Show, sister publication of Nest Egg.
Further, Mr Kingsley said the changes will see property investors left in the lurch without the expertise of brokers who specialise in investments.
â€œThe average mortgage broker who may be processing a first home owner compared to someone whoâ€™s processing an investor that might have two properties, three properties or really sophisticated â€“ it is chalk and cheese in terms of the expertise. Now, you do not find that expertise if you walk into a bank,â€ said Mr Kingsley.
â€œIf Iâ€™m a new arrival to the country, there might be 20 banks that donâ€™t want to know me, but Iâ€™ve come with a computer science degree and five years working in Silicon Valley.
â€œBut thereâ€™s a small bank or an independent bank or a credit union who has a credit niche and they give them the loan. But that wouldnâ€™t have been found if there wasnâ€™t that broker there helping them.â€
Momentum Media director Alex Whitlock believes investors will be at the mercy of bank staff, who may not have the same level of knowledge and experience in the investment space.
â€œAs an investor, if you go to a bank branch, you get whatever chump is stood there will deal with you. And youâ€™ve got the luck of the draw,â€ said Mr Whitlock.
â€œNow, investors, when you use a broker, youâ€™ve got the chance to go and find… and there are lots of brokers that specialise in investment. It is such a nightmare, and we will go back to this again and again â€“ you walk in the branch and youâ€™re at the mercy of whoeverâ€™s there.
â€œNow, the question I would ask is, whose best interest is getting rid of and diminishing a channel that offers choice when you have a very fundamental proprietary channel that you can control things?â€
The political play
Prime Minister Scott Morrison has publicly backed mortgage brokers, with the government refraining from agreeing to move to a consumer-paid fee structure.
However, it has agreed to ban trail commission next year and will look at the feasibility of moving to a consumer-pays model in three yearsâ€™ time.
While initially supporting all of the recommendations in the royal commission report, the Labor Party this week softened its approach towards brokers, backing away from the consumer-pays model and calling for a lender-paid standardised flat fee.
Reporter, Nestegg.com.au, 22 February 2019