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A new clawback structure is now in place at the major bank to “better align” its products in market.
National Australia Bank (NAB) has updated its clawback structure, following similar moves from the other major banks last year.
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After reviewing its position on clawbacks last year, NAB has confirmed that it has moved to a new structure.
Previously, NAB clawed back 100 per cent of the upfront if a borrower refinanced away from NAB in the first year and 50 per cent of upfront if they refinanced away 13–24 months after settlement.
However, NAB has now moved to a stepped clawback commission rate for all new residential loans that refinance away from the lender after 1 September 2024.
In an update to brokers, NAB’s executive, broker distribution Adam Brown said: “The changes will fix a real pain point for brokers by improving the clawback structure and the refreshed, stepped commission rate will better align NAB’s products in market.
“These changes came into effect from 1 September 2024 and will apply to new residential loans settled after that time.”
It has also amended its trail commission structure, so it is 0.17 per cent in the first two years and then 0.22 per cent thereafter.
Several major banks have revised their clawback policies in the past year, including Westpac (which dropped down to an 18-month clawback period) and the Commonwealth Bank of Australia (CBA), which moved to a staged clawback approach after 12 months.
As such, the big four bank clawback structures on residential mortgages are as follows:
ANZ
- Zero to 12 months: 100 per cent
- 12–15 months: 50 per cent
- 15–18 months: 25 per cent
- 19 months onwards: 0 per cent
CBA
- Zero to 12 months: 100 per cent
- 12–13 months: 50 per cent
- 13–23 months: Staged – drops every month by around 4 per cent
- 24 months onwards: 0 per cent
NAB
- Zero to 12 months: 100 per cent
- 13–24 months: Staged – drops every month by 4 per cent
- 25 months onwards: 0 per cent
Westpac
- Zero to 12 months: 100 per cent
- 12–18 months: 50 per cent
- 19 months onwards: 0 per cent
Non-bank lenders, meanwhile, have been removing clawbacks on some of their products completely.
Bluestone, MA Money, Resimac, Better Choice, and Rate Money have all removed clawbacks on some of their product lines in the past year, while Pepper Money removed clawbacks on commercial finance products last year and Mortgage Ezy has removed clawback on the majority of its loan products, too.
Calls to update clawback arrangements have long been raised by the broking industry, with the industry flagging that it is particularly unfair for brokers to have their remuneration clawed back up to two years after the work was done. Brokers have long argued that it is particularly unfair to be clawed back when the discharge is outside of their control (for example, if the borrower’s financial circumstances change due to divorce/death/life event).
The Assistant Treasurer and Financial Services Minister Stephen Jones MP met with members of the broking industry in July to discuss clawback and net-of-offset commissions.
Following more than two years of discussions between the Finance Brokers Association of Australia (FBAA) and the federal government about the “unfair clawback” structure and net-of-offset commission structures impacting broker incomes, a meeting took place on 8 July between Minister Jones and members of the FBAA to tackle the matter.
While no actions have yet come about as a result of the meeting, the minister reportedly asked the FBAA to put together a list of top priorities and outcomes they want to see brought about.
Major bank commissions in the spotlight
The topic of broker commission structures has been heating up recently, after two CEOs of the major banks incensed the industry by saying that broker pay should be reviewed.
The comments came during the standing committee on economics’ review of the major banks, when the two CEOs were asked about the potential risk caused by removing bonus caps for bankers recommended by the Sedgwick Review (a move taken by CBA and NAB recently, which has drawn criticism from the financial services regulator).
In response, the CEO of Australia’s largest retail bank, Matt Comyn, pointed to the lack of caps on mortgage broker pay, saying they, too, should be reviewed if there are concerns about inappropriate lending behaviour.
The Westpac CEO Peter King echoed these concerns later in the day when questioned by the committee, saying that any caps or incentives should apply on an even playing field, if at all.
[Related: Unpacking the unjust clawback: A call for fairness in finance]
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