Brokers play a ‘fundamentally important role’ in competition: Frydenberg

EXCLUSIVE: The Morrison government is “strongly supportive” of brokers and the role they play in competition, the federal treasurer told Momentum Media.

Speaking in an exclusive interview with Momentum Media Director Alex Whitlock, Federal Treasurer Josh Frydenberg acknowledged the valuable role that brokers play in competing in the home loan market, agreeing that the The mortgage brokerage industry has its best years ahead of it.

The Deputy Leader of the Liberal Party and MP for Kooyong was asked by Momentum Media Director Alex Whitlock about the importance he places on brokers in “keep rates low,” both “in the early days of the mortgage market” when the Aussie and Wizard brands began challenging the banks, and now.

Mr Frydenberg replied: “Well, mortgage brokers have played a fundamentally important role in providing more competition and choice in the housing market… [T]Here are over 16,000 mortgage brokers who employ over 25,000 people and, you know, they originate over 57% of new residential mortgages.

“So they drive competition because, especially for smaller lenders who don’t have a national footprint, it gives them the opportunity to promote their products.”

The Treasury added that the value brought by brokers in driving competition had already been recognized by the Productivity Commission and the Royal Banking Commission, adding: “And as you know, we have been very supportive of them in what ‘they do.”

“So we will continue to encourage competition, we will continue to encourage choice. And, some of those trailblazers that you pointed to, I think they’ve been a net positive for the market,” he said.

Mortgage Broker Review Expected in “Second Half” of 2022

Whitlock referred to comments by former Australian CEO James Symond in the Podcast from the mortgage and financial leader earlier this year that “the mortgage brokerage industry’s best days are ahead of us”, asking Mr. Frydenberg what he thought of the matter.

The treasurer replied, “Absolutely. And we made some changes around the duty of higher interest, as you know. And there will be other reviews (which were previously announced) in the second half of next year.

“But obviously we strongly support the mortgage brokerage industry [and] the role it plays as a source of competition and an incentive to choose…

“They are big employers throughout the community. And they are able to give small lenders the opportunity to sell their products more widely. Because if they don’t have mortgage brokers – given that they don’t necessarily have that national footprint like the big banks so, you know, they’re hampered in their ability.

Mr. Frydenberg concluded by saying: ‘To all these mortgage brokers, all the best to them, and to all those looking to enter the housing market.’

The Treasurer’s comments come as the brokerage industry operates under a series of new reforms brought on the heels of recommendations from the Royal Banking Commission.

Earlier this month, a a series of new financial services laws have come into forceincluding reference check and information sharing requirements, as well as the offense report obligations and deferred sales for supplementary insurance.

At the start of the year, mortgage brokers also began operating under a new best interest bond as recommended by Commissioner Kenneth Hayne in 2019.

While the government initially stated in its official response to the final report of the Royal Banking Commission that it would prohibit the payment of trailing commissions for new mortgages from July 1, 2020, the Treasurer revealed in March 2019 that the role of the initial and follow-up commissions would instead be reviewed in 2022.

Speaking in 2019, Mr Frydenberg said: ‘Only government can be trusted to protect the mortgage brokerage industry and ensure competition is enhanced so consumers get a better deal.’

This story is part of a series of articles taken from the interview between Momentum Media Director Alex Whitlock and Federal Treasurer Josh Frydenberg. You can read more about Mr. Frydenberg’s thoughts on Australia’s economic recovery here, and read more about his thoughts on competing in the home loan market on our sister title, Mortgage Business.

Brokers play a ‘fundamentally important role’ in competition: Frydenberg

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Last update: October 11, 2021

Posted: October 12, 2021

Annie Kane

Annie Kane

Annie Kane is the editor of The Adviser and Mortgage Business.

As well as writing about the Australian brokerage industry, the mortgage market, financial regulation, fintech and the wider lending landscape, Annie is also the host of the Elite Broker and In Focus podcasts and The Adviser webcasts. Live.

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