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The CEO of a non-major bank has called on the financial services royal commission to reflect on the findings of the competition watchdog’s mortgage pricing report before recommending changes to the broker model.
In response to the “timely” release of the Australian Competition and Consumer Commission’s (ACCC) final report on residential mortgage pricing, ME Bank CEO Jamie McPhee has urged the financial services royal commission to consider the findings of the report before making any changes to the broker remuneration model.
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The ACCC found that opacity is rife in advertised headline interest rates for mortgages, causing inefficiency and stifling price competition.
In its report, the ACCC also accused ANZ, the Commonwealth Bank of Australia (CBA), NAB, Westpac and Macquarie (the “inquiry banks”) of engaging in “synchronised” pricing behaviour, pointing to the banks’ pricing response to the prudential regulator’s 30 per cent cap on interest-only lending.
“The [ACCC] has used its final report into residential mortgage pricing to shine further light on the issue of competition within banking. In doing so, it provides added impetus for reforms to improve and protect competition,” Mr McPhee said.
“To have another reminder that we have problems with competition in the banking sector is particularly timely given the royal commissioner will be writing [his] final report and given we know competition is a key protection against misconduct in banking.”
In lieu of the ACCC’s admission that consumer choice and competitive pressure from smaller lenders would be threatened by any regulatory measures that affect the role of mortgage brokers, Mr McPhee emphasised the need for careful consideration of potential regulatory change.
“The ACCC has reconfirmed the importance of mortgage broking to competition, particularly timely given royal commission focus on broker remuneration. It’s a reminder that any recommendations by the royal commission will hopefully take impact on competition into consideration,” the ME CEO continued.
“We acknowledge the remuneration structure in mortgage lending needs to ensure a ‘customer best interest test’. However, consumers are the big winners from the competitive dynamic that brokers bring.”
Mr McPhee concluded: “The ACCC has, like the Financial Services Inquiry and the Productivity Commission before it, acknowledged some of the key issues with banking competition in Australia and the areas that need reform.
“We need to foster healthy competition between banks well into the future, as it benefits consumers and will help stamp out misconduct within the industry.”
Mr McPhee echoed remarks made by AFG CEO David Bailey, and follows statements from the Finance Brokers Association of Australia (FBAA), and the Mortgage and Finance Association of Australia (MFAAA), which noted that the ACCC report has presented brokers with an “opportunity” to demonstrate their utility to borrowers.
[Related: ACCC highlights need to preserve broker model: AFG]
