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The broking industry has been a “game-changer” in the Australian mortgage market, and changes that would “upset” the model “wouldn’t be wise”, a bank CEO has said ahead of the release of the royal commission’s interim report.
Speaking to The Adviser, the executive director and CEO of Goldfields Money, Simon Lyons, warned against fundamental changes to the broking industry and highlighted the role that the industry has played in enhancing competition in the mortgage marketplace.
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“Our view is that what works for the customer is what’s important here,” Mr Lyons said.
“I think the mortgage broking industry in Australia has been very effective in introducing competition among banks.”
Mr Lyons also emphasised the value of the broker proposition in an increasingly complex mortgage marketplace.
“If you look around now, there’s up to 3,400 different mortgage products in the market, and I defy the average Australian consumer to be able to look at it and actually understand what it is,” the CEO added.
With the Royal Commission into Misconduct in the Banking, Superannuation and Financial Services Industry set to release its interim report — which could include a focus on broker remuneration, given the closing remarks from the first round of hearings — by the end of this week, Mr Lyons said that he believes it “wouldn’t be wise” to “upset” the broking industry.
“We think the mortgage broking industry has been a game-changer in Australia in terms of reducing the margins that banks have made on loan products, and that’s obviously been better for the consumers,” the CEO said.
“It wouldn’t be wise to have anything that particularly upsets that model, when it seems to be working well here.”
The bank CEO concluded: “Consumers are better off going to a mortgage broker who acts professionally, looks across a range of lenders and can recommend different products that can perfectly suit the customer.
“I’d certainly hate to see anything that upsets that model, and potentially makes it more difficult for customers to get a good deal.”
Mr Lyons’ comments followed the release of Goldfields Money’s updated full-year 2018 financial results (FY18) — the year to 30 June — which incorporated operating changes brought about following its merger with mortgage aggregator Finsure.
The updated report has revealed that the merged group posted an underlying pro forma net profit after tax (NPAT) of $6.7 million, compared to the $407,000 loss reported by Goldfields in August.
Goldfields has also reported that the merged entities have posted cumulative growth in managed loan settlements of 49 per cent to $432 million in FY18, and combined growth in aggregation loan settlements of 19 per cent to $12 billion.
The group reported a combined loan book that totalled $31.8 billion as of 30 June 2018, up by 27 per cent.
Further, Goldfields has noted that the newly merged group reported 170 per cent managed loan growth in July to $72 million, with aggregation loan settlements also increasing in July, rising by 31 per cent to $1.2 billion.
Mr Lyons said that the bank’s merger with Finsure would allow it to expand its presence in the marketplace by accessing Finsure’s network of approximately 1,500 brokers.
“Coming together with Finsure gives us access for our products onto their platform, which means that the Finsure brokers will be able to market Goldfields Money products to their customer base and allows us to work with the Finsure wholesale banking division, which is a white label product that Finsure put to the market under the Better Choice Home Loans brand,” the CEO said.
“What it does is it gives Finsure brokers access to what we consider to be world-class products, and it also gives us access to [Finsure’s customers] with an ability to potentially have them join us for a deposit product and other such products.”
[Related: Bank-aggregator merger gets thumbs up from shareholders]
