The rich get richer…

The fallout of the Royal Commission has dominated news headlines in recent days, and for good reason.

The way the banks have acted has been appalling. Stories such as this one – where BankWest abruptly changed the rules on a borrower (who hadn’t ever missed a single payment, by the way), and demanded they repay their loan within 2 years instead of the initial 15-year agreement – are beyond the pale.

We can only hope that the 76 new recommendations that came out of the final report will start to stamp out their abhorrent behavior.


But there is going to be another consequence of the Royal Commission that not enough people are taking about. And it’s a change that is going to see the rich get richer, and the poor get poorer…

One of the key recommendations from the Hayne report is a change to the way the mortgage industry works. At the moment if you use a broker to get a home loan, the bank who settles the loan pays the commission, typically 0.6% of the loan value. On a $500,000 loan, it is $3000.

The proposed change would see this cost fall on the borrower instead.

I don’t know about you, but as an everyday Australian earning an everyday income – I don’t have $3000 spare to pay a mortgage broker.

Which means, we’ll stop using them.

Which means, we’ll have to apply direct with the banks.

And this is where the problems begin for consumers.

I know from personal experience that the Big 4 have very tight loan criteria. Years ago, my loan was rejected by two big banks because I’m self-employed and they didn’t like that. I had to turn to a smaller lender (which, ironically, was owned by one of the Big 4 who rejected me!) for a mortgage.

It was only with the guidance of my mortgage broker that I was able to find this third bank who was willing to give me a loan.

So what will my financial future look like, now that it’s only going to be those with fat pockets who will be able to afford the services of a broker – who will search the market and find them the best deal, the cheapest rates and the most suitable loan for their needs?

Moreover, how will this encourage the banks to lift their game with customers – when they’re the ones making the commission savings, to the tune of billions of dollars per year?

The system is definitely broken alright – and I’m not convinced the Royal Commission is going to fix it.

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