The Advocacy Committee has put together a submission to the Prime Minister regarding the impacts on the mortgage broker sector of the outcomes from the Royal Commission.
Below is a copy of the content of the submission for the information of our members.
To Prime Minister – Hon Scott Morrison.
Cc Hon. Peter Dutton – MP/Minister & Member for Dickson,
Submission regarding the proposed Impacts to Mortgage Broker Sector
As a local Chamber of Commerce supporting small business and the community in both the Moreton Bay Region and Brisbane City Council, we are very concerned about the possible negative outcomes for small business if the proposed Royal Commission recommendations around Mortgage Broker Remuneration are implemented.
Small businesses are heavily dependent on mortgage brokers to secure funding to support business growth. Borrowings for small business and residential market have become harder to secure in recent years. Brokers provide access to other avenues and smaller lenders who are prepared to back small businesses where the larger banks are reluctant to lend, especially as the banks have closed many branches.
Some of the other areas in which the support of a broker is crucial to small business are:
They provide invaluable support in helping business owners explain their incomes and business structures to lenders to assist in the application process.
Many small business loans come with covenants that must be met at review each year requiring the time and expertise of the broker to ensure the facilities remain in place.
Keeping business owners and residential customers up to date on new or different finance options to improve their cashflow.
We are aware through discussions with several mortgage broking professionals that the proposed changes to remuneration being proposed apply to residential home loans only rather than to business lending. It is however critical to note that for most small businesses, the income a mortgage broker earns from smaller business loans is seldom anywhere near enough to compensate them for the extra time involved in securing the finance.
Income earned by the broker from looking after a business owners home loan, particularly the structure of some of the brokers income being deferred over time and paid as “trail income”, is essentially what allows the broker to invest the time in helping small business owners secure and retain their business finance.
We are already facing a likely credit squeeze, which on its own could drive many mortgage brokers out of the industry as lending volumes contract. Should mortgage brokers suffer any further reduction in their income due to any changes implemented, we are very concerned that less brokers in the market would also ultimately lead to less small innovative lenders and reduced competition. This could result in a severe impact on both access to and the cost of credit for small business.
We encourage the federal government to support small business by supporting mortgage brokers and ensuring that any proposed changes are well considered, do not result in a loss income for them, and maintain the current alignment of interests between broker and customer that exists within the current remuneration model.
Our Chamber is also affiliated with the Queensland Chamber of Commerce & Industry (CCIQ) so the small business voice can be better heard across Queensland.
We are planning to present our submission to the leaders of each Political Party or through the known candidates in the Queensland seats of both Dickson & Ryan. So, we would be very keen to be kept informed as to the status of this very important matter to impact small business and our Chamber members.