Federal Labor will allow mortgage brokers to continue being paid by banks if it wins government, abandoning its previous support for the Royal Commission’s call that consumers should pay brokers.
Shadow Treasurer Chris Bowen says upfront commissions, which are paid by banks to brokers for arranging loans, should be allowed to continue but be capped at 1.1% of a loan’s value.
That would roughly double current upfront commissions, which would partly cushion the impact from Labor’s already flagged policy to ban trail commissions.
The policy is a stark change from Labor’s initial “in principle” support for the Royal Commission’s recommendation that all commissions be phased out and replaced with a fee paid by consumers.
Investors are now betting the outlook for mortgage brokers is as grim as feared. After shares in listed brokers Mortgage Choice and AFG crashed in response to the Royal Commission’s call for an overhaul of remuneration, both stocks rebounded following the backdown from Labor.