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ASIC zeros in on mortgage brokers

ASIC zeros in on mortgage brokers

Posted: 25 Nov 2015

The Assistant Treasurer gave the corporate watchdog the go ahead to dissect the third-party channel, after broker loans accounted for around 82 per cent of the increase in new home loans in the September quarter.

These figures are coupled with additional data from the CoreLogic business 'comparator', crediting brokers with a record September quarter of 52.6 per cent of new lending in the residential home loan market, the highest ever share for the industry.

The Australian stated that it is believed the review follows ASIC's concerns of practices in the industry and the increase in investor lending.

MFAA CEO Siobhan Hayden said the Association looks forward to working with ASIC to highlight the value of brokers.

"The key focus would be to show that the structure of remuneration is in line with the interests of clients,'' she told The Australian.

ASIC will look into the vertical integration structure of the industry and the remuneration provided by the big banks and smaller lenders, comparing the proportion of loans written by brokers through relevant ownership structures against those of other lenders.

ASIC has recently focused on a host of financial services sectors, but Mortgage Choice CEO John Flavell said the industry should welcome the spotlight.

Reportedly Flavell said "We applaud ASIC's decision to put the mortgage broking industry under the microscope, as they will then be able to see the tremendous job this industry does for consumers each and every day."

"When I first started in financial services, I worked in retail banking for one of the majors. Back then, the mortgage broking industry was non-existent and Australia boasted some of the highest home loan rates in the world.

"When mortgage brokers made their market debut, lenders were forced to basically drop their home loan rates overnight."

Flavell said that mortgage brokers not only fuel innovation and provide valuable competition, but give consumers the viable option to potentially choose a more appropriate product and lender through professional advice.

"In addition to lender competition, mortgage brokers have been responsible for driving home loan innovation and giving borrowers the right to choose the best product and lender for their needs," he said.

"Of course, we don't just support the need for transparency – we live it. At Mortgage Choice, we educate customers on how brokers get paid and ensure they understand that our brokers are paid the same rate of commission regardless of which home loan product a customer chooses from our panel of lenders.

"We strongly believe the third-party distribution channel has nothing to hide and an inquiry into the industry will only serve to prove this point."

Following the inquiry from ASIC, other sectors have been called on to implement stronger qualifications and education. However, recalling current record industry figures, MFAA CEO Siobhan Hayden rightly pointed out that MFAA brokers are appropriately qualified and a completely separate entity to other industries.​​​

"Our members are the best educated brokers and these figures illustrate that customers consistently find that dealing with brokers delivers an enhanced customer experience," she said.




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