In news this month, the demand for mortgages continues to weaken. Cameron Kusher of CoreLogic has speculated that if the fall in house prices is to be attenuated then we could see the RBA cut rates and APRA relax its tightening of lending conditions. Westpac’s chief economist Bill Evans is now predicting 2 rate cuts before the end of this year.Read More
When we move to a new house, especially if it’s a big move such as from city to country or from one country to another, the process of moving inevitably changes us. For a start, we are now a newcomer and the “locals” will speak of us that way.Read More
In what has been described as “an opportunistic attempt to to reduce competition in the Australian mortgage market”, CBA CEO Matt Comyn has disingenuously led the Royal Commission Into Financial Services Industry to form the view that Mortgage Brokers are paid trailing commissions, but not required to do any work to receive them.
To help Mr Comyn to better understand the industry at grass roots level, I have prepared for him the following definition of “no work”.
“The No-Work” Carried Out By Mortgage Brokers in Return for Trailing Commissions
Maintain a local office to service clients
Employ staff to help cater for post settlement service enquiries on loans under management
Continuing Professional Education (min 30 hours per year)
Maintain Professional Indemnity Insurance
Conduct regular client loan reviews
Keep the banks honest – negotiate regular interest rate reductions as a bulwark against lenders’ practices of creeping rate margins
Assist clients with loan increases/ restructures / loan discharges
Prepare client claims on loans with progressive payments (construction loans)
Provide financial education via client newsletters and market updates
Help clients with debt scenarios and calculations when they are trying to make plans for the future
Provide local personalised service where clients do not wish to wait in long phone queues to ask a bank call centre questions about their loan
Act as advocates to help clients resolve bank errors to their satisfaction
all of the above are done while a Mortgage Broker meets all the costs of running their own business including IT systems (hardware and software), communications systems, stationery, public liability insurance, staff benefits including training, superannuation and annual leave, accounting systems, services subscriptions, aggregator fees, transport, utilities, mail and couriers and marketing.
Trailing commissions provide an important component of cash flow stability which help to keep broking businesses viable, and staff employed in a fluctuating market. They exist for the same reason that bank interest margins do.
Not every broker will do all of the above but then neither is every company CEO as diligent or effective as their industry peers in properly managing their businesses, recognising problems and addressing them courageously and ethically in the interests of all stakeholders.
The events at the Royal Commission this week have been likened to throwing mortgage brokers under a bus. In fact it has become a little crowded under that bus this week.
"To throw (someone) under the bus" is an idiomatic phrase in American English[dubious – discuss] meaning to betray a friend or ally for selfish reasons. It is typically used to describe a self-defensive disavowal and severance of a previously-friendly relationship when the relationship becomes controversial or unpopular or inconvenient. (1)
Wikipedia - Throw under the bus
As property prices in Sydney have soared so have the revenues flowing to the State government as it rakes in record levels of tax revenue through the stamp duty on property transfers. This stamp duty, approximately 4% of each property transfer, is a significant impost which increases the savings threshold for first home buyers and acts as a brake on mobility in the property market.Read More