NAB provides mental health hotline for brokers stressed about Hayne review

AFR Duncan Hughes 18 feb 2019

It comes as mortgage brokers are signing on to a mental health counselling scheme that identifies stressed borrowers called "Accidental Counsellor", which is for employees who find themselves in a counselling role by accident.

Mr Felton said an increasing number of borrowers are also stressed by falling property prices, rising costs, negative equity and difficulty renegotiating interest-only loans.

For example, about 650,000 borrowers with loans totalling about $230 billion are "trapped" in their interest-only loans and could struggle to refinance, forcing many to sell into already deteriorating property markets, according to investment bank Morgan Stanley.

The waiting game

Mortgage brokers comprise more than 7000 businesses and have 17,720 employees, with revenue of about $2.2 billion and total wages of more about $1.5 billion, according to IBISWorld.

Brokers account for about 59 per cent of deals – much more among smaller lenders with small, or no, branch networks.

Mr Felton said he is pressing the government for a decision by the end of March about whether upfront and trailing commissions will be retained, decreased, abolished or replaced by a hybrid.

But high-level deliberations could be pushed down the policy agenda in the build-up to this year's federal election.

The big four's use of mortgage brokers ranges from about 56 per cent for ANZ to 42 per cent for National Australia Bank. 

The royal commission wants commissions scraped and replaced by a fee paid by the borrower to the broker.

Trailing commissions

At present, a mortgage broker who arranges borrower finance will receive an average upfront broking commission from lenders of about 0.6 per cent of the loan value and a trailing commission of just under 0.2 per cent of the loan outstanding every year over the life of the loan, according to the Productivity Commission.

That amounts to a mortgage advisory fee of about $6000 for the mortgage of an average loan of about $357,000.

But independent research has found that borrowers are not willing to pay fees, which would save big four lenders billions of dollars in commissions and squeeze out increasingly competitive smaller lenders and shadow banks that lack sizeable branch networks.

Brokers claim it would devastate their earnings and force many out of the sector.