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EXCLUSIVE: The Morrison government “strongly supports” brokers and the role they play in providing competition, the federal Treasurer has told Momentum Media.
Speaking in an exclusive interview with Momentum Media director Alex Whitlock, federal Treasurer Josh Frydenberg has acknowledged the valuable role brokers play in providing competition in the home loan market, agreeing that the mortgage broking industry has its best years ahead of it.
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The deputy leader of the Liberal Party and member for Kooyong was asked by Momentum Media director Alex Whitlock how important he thought brokers had been in “keeping rates low”, both “in the early days of the mortgage market” when the Aussie and Wizard brands were first challenging the banks, and now.
Mr Frydenberg responded: “Well, mortgage brokers have played a fundamentally important role in providing more competition and choice in the housing market … [T]here's more than 16,000 mortgage brokers employing more than 25,000 people and, you know, they're behind more than 57 per cent of new residential mortgages.
“So they do provide a boost to competition because, particularly for the small lenders who don't have the national footprint, this gives them the ability to promote their products.”
The Treasury added that the value brokers provide in driving competition has previously been recognised by the Productivity Commission and the banking royal commission, adding: “And as you know, we've been very supportive of them in what they do.”
“So, we'll continue to encourage competition, we'll continue to encourage choice. And, some of those pioneers that you've indicated, I think they've been a net positive for the market,” he said.
Mortgage broker review expected in ‘back half’ of 2022
Mr Whitlock referenced comments made by former Aussie CEO James Symond in the Mortgage & Finance Leader podcast earlier this year that “the best days of the mortgage broking industry lie ahead”, asking Mr Frydenberg what his thoughts were on the matter.
The Treasurer replied: “Absolutely. And we made some changes around the best interests duty, as you know. And there'll be further reviews (that were previously announced) in the back half of next year.
“But we obviously support strongly the mortgage broking industry [and] the role that it plays as a source of competition and encouraging choice …
“They're big employers across the community. And they're able to give smaller lenders the ability to sell their products more broadly. Because if they don't have the mortgage brokers – given they don't have that national footprint necessarily like the big banks – then, you know, they're hindered in their ability.”
Mr Frydenberg concluded by saying: “To all those mortgage brokers out there, all the very best to them, and to all the people who are looking to get into the housing market.”
The Treasurer’s comments come as the broking industry operates under a swathe of new reforms brought about as a result of recommendations from the banking royal commission.
Earlier this month, a range of new financial services laws came into effect, including reference checking and information-sharing requirements, as well as the breach reporting obligations and deferred sales for add-on insurance.
At the beginning of the year, mortgage brokers also began operating under a new best interests duty as recommended by commissioner Kenneth Hayne in 2019.
While the government had initially said in its official response to the final report of the banking royal commission that it would ban trail commission payments for new mortgages from 1 July 2020, the Treasurer revealed in March 2019 that the role of upfront and trail commissions would instead be reviewed in 2022.
Speaking in 2019, Mr Frydenberg said: “Only the government can be trusted to protect the mortgage broking sector and ensure that competition is strengthened so consumers get a better deal.”
This story is one in a series of articles from the interview between Momentum Media director Alex Whitlock and federal Treasurer Josh Frydenberg. You can find out more about Mr Frydenberg’s thoughts on Australia’s economic recovery here, and read more about his thoughts on competition in the home lending market on our sister title, Mortgage Business.
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