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The cost of broker commissions is “priced into the cost of a mortgage”, the shadow financial services minister has claimed, but highlighted the “value” of the channel.
The shadow financial services minister and shadow assistant treasurer, Stephen Jones MP (member for Whitlam), has suggested that the banks are “factoring in” the cost of using mortgage brokers into mortgages, adding that “customers are paying one way or another”.
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Mr Jones made the comments while speaking to Momentum Media in an exclusive interview focusing on the Australian Labor Party (ALP) and its plans for the financial services, credit and superannuation sectors (available via The Adviser’s Podcast Network).
After reiterating that the ALP would not look to change broker remuneration should it win the federal election in May (“If it ain’t broke, don’t fix it”, he said), Mr Jones was asked whether he believed Australians should pay for mortgage advice.
In response, the shadow financial services minister and shadow assistant treasurer said: “Well, they are paying one way or another. There’s no such thing as a free lunch.
“The commission that is paid by the institution, by the lender to the broker is priced into the overall cost of a mortgage. For God’s sake, banks charge you a fee to use an ATM, they charge you a fee to use tap-and-go at a supermarket. They’re pretty good at factoring in all of the costs of a transaction, whether it’s a mortgage or a transfer somewhere else in their payment systems.
“Anyone who says the price of a mortgage broker isn’t being passed on the customer, somewhere along the line, doesn’t get how these institutions work.
“So, customers are paying one way or another. And it should be transparent and the ethical requirements on advisers and the best financial interest duty, make all of that sort of stuff transparent. That’s a good thing.
“And I don’t see a long queue of customers coming to me saying: ‘We want to change this.’”
The shadow assistant treasurer told Momentum Media that while the ALP “respects” commissioner Kenneth Hayne’s views and analysis from the banking royal commission, when it “looked at how [a consumer-pays model] would operate in practise, we don’t think got the balance right”.
“So, we won’t be making that change,” he said.
“Frankly, I don’t think there’s a problem there to fix. There is not a problem there to fix.
“If something way down the track emerged where people were doing the wrong thing, then we will focus on the people doing the wrong thing, but we don’t need sledgehammers to break walnuts.”
Shadow financial services minister switched to a broker
The member for Whitlam added that he “see[s] the value” in brokers, revealing that he had himself recently converted to the third-party channel after being a direct customer for over 20 years.
When asked about why he switched channels and whether he would recommend the services of a mortgage broker, Mr Jones said: “Look, I consider myself incredibly busy. I’ve been a pick-and-stick guy. I’ve had the same residential mortgage provider for over 20 years (I’ve had a couple of different homes over 20 years, but the same provider), I’ve just gone back to the paddock that I knew best…
“It was after dealing with this stuff in the last parliament – and having a lot of mortgage brokers come to me and talk about what they do – and I said: ‘I’m going to give you guys a go.’
“So, I did it, and I can absolutely guarantee that I’m paying less on my mortgage today, and probably will be well into the future, because I took that step and reached out to a broker.
“So, I see the value that you guys bring and more strength to your arm. I’m better off for it, and so are millions of Australians,” Mr Jones said, noting that brokers are “now the major front door for customers entering the residential mortgage market”.
“[Brokers] are, overwhelmingly now, the majority entry point for ordinary customers entering the mortgage market.
“Customers are getting a good deal. I can speak from personal experience that customers are getting a good deal because they consult with their credit adviser; their mortgage broker.”
The shadow financial services minister said that brokers will be increasingly important for mortgagors moving forward given increasing expectations that interest rates will rise soon and noting that lenders have already begun hiking both fixed and variable rates.
“What I want to see brokers focusing on over the next two years… we want brokers to be 100 per cent focused on ensuring that everyone on their books has access to the best-priced mortgage at a time when we know mortgage rates are going to go up and cost living pressures are huge,” Mr Jones concluded.
You can listen to the full podcast interview with shadow financial services minister and shadow assistant treasurer, Stephen Jones MP (member for Whitlam), on The Adviser Podcast Network, here.
[Related: ‘We are not going to change it’: Shadow minister for financial services on broker remuneration]
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