Login
ISCOVER
Another bank has announced that it will be updating the way it pays broker commissions from 1 January 2019.
Suncorp has confirmed that, from next year, it will change broker upfront commissions for new home loan settlements.
To continue reading the rest of this article, please log in.
Looking for more benefits? Become a Premium Member.
Create free account to get unlimited news articles and more!
Looking for more benefits? Become a Premium Member.
From 2019, the upfront will be calculated based on the amount drawn down by the borrower within five calendar days from the date of settlement net of any funds held in offset accounts, available via redraw or advanced payments.
The bank has announced that, as part of the change, it will introduce a residual upfront commission payment at the conclusion of the first 12 months where the net loan balance is greater than at time of settlement.
This will be paid in month 13 and cannot exceed the commission amount that would have been payable should the loan have been fully drawn at settlement.
The move comes as more and more lenders commit to the recommendations from the ASIC and Sedgwick reviews, which were backed by the Combined Industry Forum package of reforms.
Mark Vilo, Suncorp’s head of bank intermediaries, commented: “Suncorp recognises the integral role mortgage brokers play in giving our customers choice and helping them find a product suitable for their individual needs. We also recognise the important work the industry is doing to self-regulate and address perceived conflicts.
“Brokers are an important part of our business, and we will continue to support any changes which deliver positive outcomes for our customers and the industry.”
The change is only eligible for new home loans. Add loans, lines of credit and construction loans are excluded from the commission changes.
The bank has made the changes despite it outlining in its response to the interim report of the Royal Commission into Misconduct in the Banking, Superannuation and Financial Services Industry that the “introduction of a system of standardised payments to brokers” may remove incentives that “could cause bias” among brokers for lenders with higher upfront and trail commission rates.
“Brokers could be paid an industry standard percentage or fixed amount for each loan (of the same type; for example, owner-occupier or investor, lower or higher loan-to-value ratio) brokered by them irrespective of the lender,” Suncorp said.
“This would remove the possibility of brokers being incentivised to prefer the bank which paid the highest commission and instead provide a simple, transparent system of broker commissions that is easy for customers to understand.”
Further, Suncorp submitted that the introduction of “tiers or caps” in a standardised commission model could address the “problem of some brokers recommending unsuitably aggressive borrowing”.
However, Suncorp added that such a move “would need to be carefully considered in order to avoid unnecessary complexity”.
In recent weeks, Adelaide Bank, ING and MyState Bank have all announced changes to broker remuneration and all the big four banks have also committed to similar changes.
[Related: Major bank changes broker commissions]
