ONE of the key recommendations from the recent Banking Royal Commission was to put a stop to trail commissions for mortgage brokers.

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A trail commission is when a mortgage broker—whose job it is to seek out mortgage options for home buyers—continues to receive a percentage of the loan paid by the institution the mortgage is received from for the life of a loan and so long as the borrower does not default.

Although this trail commission is not a secret to clients—the home buyers—and mortgage brokers often receive the same commission from all lenders, the Commission’s findings seek to halt the practice, recommending instead for upfront payments made by the home buyers.

This dramatic change to the business model of mortgage brokers has led to concern about their viability into the future.

Mortgage brokers in the Port Stephens area have expressed concern about the recommendation, with Ms Jacqueline Stokes telling News Of The Area, “We need our customers and community to understand the ramifications of these changes.”

“Since the release of the final report, both the Federal Government and Labor Party have recognised that forcing Australians to pay an upfront fee just to get a home loan would be unpopular with consumers.”

“However our focus is now on ensuring the level and structure of any new model will continue to support a viable mortgage broking industry.”

“Getting this model wrong could significantly hurt our industry, restrict homebuyers’ choice and access to lenders, and constrain competition in home lending.”

“We are asking local politicians and key business and community groups to meet with us so we can discuss our concerns and educate decision makers about the valuable service we provide to our customers and the communities in which we live and work,” she said.

The Mortgage and Finance Association of Australia, the peak body for mortgage broker representation is seeking to educate the public about this issue and more information can be found at www.brokerbehindyou.com.au.

By Heather SHARP