Banking Royal Commission
On Monday this week High Court Justice and Royal Commissioner Kenneth Hayne handed down the report from the banking Royal Commission, which had 76 recommendations which will challenge key aspects of banking and financial services including superannuation and mortgage broking.
There has been much discussion during the Royal Commission, and since the report’s findings/recommendations have been revealed, and both major political parties have indicated support for all recommendations.
The key recommendations around banking conduct are below:
- Require mortgage brokers to act in the best interests of the intending borrower, not the bank providing the loan. Breaching this law would result in a fine.
- Borrowers rather than lenders should pay the mortgage broker for their services
- Lenders would be banned from paying trail commissions to mortgage brokers for new loans.
- Expand the Banking Executive Accountability Regime laws to track those responsible for any breach of lending laws.
Among the most significant of the 76 recommendations made is a requirement that borrowers, rather than lenders, pay mortgage brokers for their services. The change is designed to give brokers an incentive to act in the best interests of the customer rather than lenders that pay them commission.
“In particular, the changes will induce brokers to search out the best deals available,” Commissioner Hayne said.
He acknowledged requiring customers to pay a fee may be unpopular, but Commissioner Hayne said it was necessary to create a level playing field.
During 68 days of hearings over the past 12 months, the royal commission heard from 130 witnesses and received more than 10,000 public submissions.
As far as the impact these changes will have on the property market, there has been mixed reaction from analysts, and time will reveal the significance. Lending is already tight, which is impacting on the amount people can borrow, or if they can borrow at all…so watch this space.