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The broker associations have voiced their frustration and disappointment at the major bank’s move to offer a cheaper refinance product direct-to-consumers only.
Following on from the news that the Commonwealth Bank of Australia (CBA) is set to release a new direct-to-consumer refinance offer that will only be available online (and not through brokers or proprietary bank staff), members of the broking industry have voiced their surprise and disappointment at the decision.
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On Monday (20 May), The Adviser learned that the new online-only refinancing offer would undercut rates available to CBA customers through the broker and proprietary channel.
Instead, the home loan would offer discounted rates to customers moving their mortgage from another lender to CBA.
It is believed that only new (not existing) CBA customers will be able to take advantage of the digital product and only if they have a loan-to-value ratio (LVR) under 80 per cent.
Speaking to The Adviser following the announcement, the heads of the Finance Brokers Association of Australasia (FBAA) and the Mortgage & Finance Association of Australia (MFAA) both said that while they were disappointed, they did not believe the change would undermine the value or popularity of the broker channel.
‘A strange and dumb decision’: FBAA
Peter White AM, the managing director of the FBAA, said: “This is a strange – and dare I say dumb – decision by the Commonwealth Bank but one that doesn’t surprise me given they have made their disdain for the broking channel clear in recent years.
“I don’t think brokers should be too concerned because the bank has far more to lose. This can only turn more finance brokers away from supporting CBA, while at the same time generating very little business for the bank (as the product is targeting an exceptionally small percentage of the market).
“We know that only a tiny minority of borrowers will complete the entire mortgage process online.
“When making such a life-changing decision, consumers want to talk to someone who can help them, so it doesn’t make a lot of sense to me to exclude not only the broking channel but their own proprietary channel.”
However, the head of the FBAA said both brokers and consumers know that “there is a lot more to a mortgage than the interest rate”.
Indeed, the FBAA MD said that the new product launch “only confirms the value of brokers because a ‘one-size-fits-all’ product can’t be in the best interests of every borrower, which is why the vast majority of Australians trust a broker to act in their best interests”.
White said: “Brokers will, of course, continue to use CBA when it is in their customers’ best interests, but with such a competitive market, brokers can usually support lenders who support them while still ensuring the customer’s best interests are put first.
“I’d suggest the CBA will do better when they work with the broking channel and not continually look for ways to exclude us when 70 per cent of Australian borrowers use a broker.”
‘We want to see channel parity wherever possible’: MFAA
Anja Pannek, the CEO of the MFAA, said she believed brokers were going to be “really frustrated with this announcement and understandably so”.
However, like White, she said that borrowers will continue to need the advice and support of brokers when it comes to accessing a mortgage.
“At the end of the day, we know consumers are choosing to go to their mortgage brokers. This is demonstrated not only through mortgage broker market share which continues to climb, but also through our member surveys which show us that borrowers refinancing their loans are increasingly turning to mortgage brokers, [and] turning to brokers to help them navigate what is a complex market,” she said.
“Borrowers should have choice. Notwithstanding that lenders have discretion over the commercial design and pricing of their products, it is disappointing to see a major bank not making a product such as this available to brokers’ clients.
“At the MFAA we want to see channel parity wherever possible in the lending market.
“We know that borrowers are going to continue to vote with their feet, to seek out the services of their mortgage broker, knowing that their broker will work in their best interests, something that products such as this are unable to do.”
What do you think about CBA’s decision to launch an online-only refinance offering to consumers? Let us know in the comments below!
[Related: CBA cuts out broker and proprietary channel for new loan offering]
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