MFAA fights for brokers: Clawbacks, cashbacks, and extra

The MFAA addressed key dealer issues at its nationwide Trying Forward PD occasion, overlaying matters like clawbacks, cashbacks, regional financial institution closures, and the affect of refinancing and payroll tax.

With round 70% of residence loans and 40% of enterprise loans written by the third-party channel, MFAA CEO Anja Pannek (pictured above) spoke to the “pivotal function” brokers play within the lives of Australians, constructing belief and guiding them to make the fitting choices.

“Belief coupled with the constructive outcomes, or reaching your shoppers has put our business in an extremely sturdy place as we begin 2024,” Pannek stated.

“The energy of our business is mirrored in our rising market share, low complaints, and the popularity our business has obtained from authorities.”

MFAA’s method to advocacy

After relating the state of the economic system, Pannek addressed the affiliation’s method to advocacy, calling it an extended sport.

“It’s fairly uncommon there may be a direct tangible decision on points. That stated, we’ve got an excellent monitor document right here on the MFAA in reaching transformative outcomes for our members within the business,” Pannek stated.

“The cancellation of the 2022 dealer remuneration evaluate, for instance, and our proactive and profitable protection of the business on the Royal Fee come to thoughts.”

Listed below are a number of the high points Pannek coated:

Clawbacks: MFAA requires ‘equitable’ method

With some within the business likening it to fashionable slavery, maybe no situation ignites the furore of brokers like dealer clawbacks.

Pannek acknowledged its significance and referred to as for a “extra equitable method to clawbacks” however stopped wanting advocating for ruling them out fully.

“Clawbacks are an integral a part of the remuneration construction, however we actually need to see a fairer mannequin,” Pannek stated.

“What we’d like and what I encourage lenders to have a look at is a fairer clawback construction with a shorter timeframe. What would you describe as a linear declining method versus that very harsh nature of clawbacks out there.”

Pannek stated eradicating clawbacks fully would “require us to reopen not simply clawbacks, however your complete remuneration mannequin”.

“That might entail revisiting fronts and path, which does current important dangers, particularly given what we have confronted very lately round regulatory scrutiny concerning the remuneration mannequin.”

Cashbacks: finish of the ‘frenzied’ mortgage wars

On a extra constructive observe, Pannek welcomed the top of 2023’s “frenzied” mortgage wars, the place lenders closely competed for market share by introducing more and more profitable cashback presents.

This left some brokers with “nothing to point out” for the hours spent on processing loans.

Pannek stated in February final yr, she was speaking concerning the want for lenders to take away cashbacks. 

“That they had simply gotten uncontrolled. They triggered confusion from what we noticed and clearly didn’t make financial sense,” she stated.

By July, “sense had prevailed”, with “opaque” cashbacks dissipating.

“Lenders shortly thereafter began to tug again on cashbacks, which I consider is massively useful for business,” Pannek stated.

Whereas cashbacks had been a setback, Pannek was happy with the way in which brokers dealt with excessive refinancing exercise final yr.

“Some 95% of you advised us in our survey final yr that you have had shoppers utilizing a dealer [for the] very first time coming to you to refinance,” she stated. “This continues to translate by way of to dealer market share will increase.”

With a whole lot of hundreds of consumers nonetheless on fixed-rate time period loans which are as a result of expire this yr, Pannek stated debtors will possible hunt down skilled recommendation within the difficult present setting.

“Total, I see lending exercise in 2024 remaining sturdy, nevertheless at extra sustainable ranges than what we noticed in 2023.”

Borrowing capability: 1% buffer on like-for-like refinances and discharge reform

When it comes to different successes, Pannek stated the MFAA has “obtained the federal government’s consideration” on the challenges brokers have been dealing with with refinancing shoppers.

“We shared with the federal government your issues on discharges gathered by way of suggestions on tables and surveys,” stated Pannek, explaining that these engagements led to the federal government reinvigorating the Dwelling Mortgage Worth Inquiry from 2020.

“Authorities is now centered on how competitors within the residence mortgage market could be improved,” Pannek stated.  “This has given us an actual alternative to marketing campaign instantly not on simply the discharge points that you just’re dealing with but in addition on channel parity.”

One concern that many MFAA members raised with Pannek was about serviceability and borrowing capability.

Banks should at present take into account a 3% “buffer” rate of interest on high of the particular charge when assessing how a lot debtors can afford to repay. This buffer, imposed by the regulator (APRA), was meant to arrange debtors for potential future rate of interest hikes.

Nonetheless, with rates of interest doubtlessly reaching their peak, some within the business query the necessity for such a excessive buffer, arguing it unnecessarily restricts borrowing capability.

This has left many debtors in “mortgage jail”, unable to refinance to a distinct lender due to the excessive buffer charge.

Pannek stated the MFAA wish to see additional choices for mortgage prisoners, “pathways for instance”, to a 1% buffer on like-for-like refinances.

Nonetheless, she additionally identified that many members have seen a extra secure outlook and are “trying to purchase now reasonably than wait”.

“Particularly given we see continued sustained property worth progress, for now, a few of your shoppers will nonetheless be cautious,” Pannek stated.

“If charges do begin to come down over 2024, we see this as an enormous profit when it comes to cost-of-living reduction for mortgage holders and likewise for these caught in mortgage jail because it offers them an opportunity to refinance – which is your likelihood to help them.”

Payroll tax and regional department closures: Advocacy continues

One other main focus for the MFAA, in accordance with Pannek, was its advocacy towards Income NSW’s proposal to implement retroactive payroll tax on aggregators.

In February 2023, Income NSW had alleged that aggregators are working because the employer of their dealer community and are subsequently liable to pay payroll tax.

The MFAA’s longstanding place was that Income NSW had no authorized foundation to levy payroll tax on the business and by March had secured a cease motion.

“Participation in New South Wales and proper throughout the nation was completely pivotal when it comes to reaching this consequence,” Pannek stated.

“And relating to payroll tax, this is a matter that we stay centered on in 2024.”

Lastly, Pannek touched on department closures in regional and distant areas speaking about how she appeared in a senate inquiry on the problem late final yr.

“The message from the inquiry was that you just brokers are filling the hole in bringing alternative and competitors to those communities and that lenders have to spend money on methods and assist you to maintain doing that.”