The mortgage industry has responded to two columns that called Australian brokers “wealthy” and “brash”, criticising broker renumeration, and implying that brokers are incentivised to encourage clients “to sell their existing homes and to upgrade to new and more expensive properties”.
The opinion articles, written by Australian Financial Review columnist Karen Maley, drew the ire of the industry, with brokers, aggregators, and peak industry bodies alike posting their dissatisfaction on LinkedIn.
MFAA CEO Anja Pannek (pictured above far left) said the “grossly inaccurate” opinion columns misrepresented the “work of brokers, how they are remunerated and regulated”.
“Brokers bring choice and competition to the home lending market - so consumers benefit,” Pannek said. “Consumers can be confident they have protection under law working with their broker - under both responsible lending and the unrivalled mortgage broker best interest duty.”
“A broker’s remuneration is highly regulated and disclosed to their clients.”
FBAA managing director Peter White (pictured above centre left) agreed that the opinions expressed by a columnist were inaccurate and displayed not only “a misunderstanding of legislation and the way our sector works, but a blatant bias against brokers”.
I am disappointed that the AFR failed to fact check this dribble and have advised the AFR of this,” White said. “From the writer’s claims around broker average remuneration to many other false statements, the entire piece was rubbish and doesn’t deserve to be in a national publication.”
See LinkedIn post here.
With strong comments coming from some of the industry’s most recognisable figures, one may question what was published to cause such a vitriolic reaction.
In the opinion article, “The unstoppable rise of Australia’s mortgage brokers”, consider the opening sentences, for example: “If you were about to buy a million-dollar home, would you be prepared to pay about $14,000 to a mortgage broker for help tracking down the best deal?
“Many people would baulk at the prospect of forking out such a large amount for the dubious pleasure of an $800,000 home loan.”
Tim Brown (pictured above centre right), consultant at mortgage lender BC Invest, said he wasn’t sure where the calculations came from.
“They quoted a commission of $14,000 for a loan of $800,000,” Brown said.
“The average upfront commission on a loan that size is 0.65% which calculates to $5,200, even adding trail at $1,200 per year, with the average life of loan now lucky to be 36 months equates to $8,800. The average loan in Australia is $600,000 not $800,000.”
See LinkedIn post here.
In the second opinion article titled, “Banks gear up to take back mortgage market from brokers”, it suggested that the average Sydney broker is pocketing $670,500 a year when trail commissions are included.
Mortgage broker Max Harris, from Azura Financial, refuted such claims.
“This implies roughly $65 million in annual settlements, which is a significant amount,” Harris said.
“To give you perspective, Azura Financial won top non franchise brokerage in NSW in 2024. Out of our 12 brokers, only six wrote more than $65 million and we are one of the top brokerages in the country.
“Furthermore, the author is implying that brokers do not have costs and that every dollar of revenue is profit. I wish. We are small businesses just like a cafe or a real estate agency. We have staff, rent, marketing costs and fixed over heads.
“Comparing top line revenue is a ridiculous argument.”
See LinkedIn post here.
Perhaps the most systematic response and analysis of the articles was by LMG executive chairperson Sam White (pictured above far right).
In an open letter, White outlined the facts to address “all of the inaccuracies with data to support it”.
“I’m deeply passionate about this. Brokers save clients money by fostering asset competition, reducing mortgage loyalty taxes, and advocating for fair deals for their clients,” said White.
“We’ll keep advocating for brokers to make sure competition, accuracy and fairness prevail in our industry. I encourage you to read the full letter and welcome your thoughts on this to ensure we have a balanced view of the mortgage broking industry.”
See LinkedIn post here.
Despite the negative press, the mortgage broking industry remains highly regarded by borrowers.
While the industry is frustrated by the portrayal in the AFR articles, the overwhelming trust of Australian consumers speaks volumes.
As Pannek said, the industry has gone through significant reform and the numbers tell the story.
“Almost 72% of consumers choose to use a broker - more than ever before. And less than 0.5% of all complaints across Australia’s bank and financial services sector are broker-related - which is negligible,” she said.
The MFAA said it would be using “every avenue available” to ensure the facts are accurately represented.
Peter White said it doesn’t deserve the attention and there was no point getting worked up about a couple of articles by someone who is “clearly misinformed”.
“My message to brokers is to focus as you always do on serving Australia’s borrowers well and ensuring you act in their best interests,” White said. “The fact that mortgage brokers are trusted so highly by our customers is all that matters.”
“The FBAA is continually dealing with all levels of government, regulators and other stakeholders and these parties all know the truth and value our industry, as do millions of Australian consumers.”
Even so, Peter White sent a letter to the Australian Financial Review (AFR) requesting a right of reply. Here is the letter written by Peter White in full:
As the managing director of the Finance Brokers Association of Australia, I am writing to request the opportunity to write an opinion piece for the AFR in response to what was at worst a biased attack on our industry and at best inaccurate, misleading and frankly irresponsible articles in your publication today and over the weekend – “Banks gear up to take back mortgage market from brokers” and “Inside the unstoppable rise of Australia’s mortgage brokers”, by your columnist Karen Maley.
Finance and mortgage brokers are responsible for more than 70% of Australia’s mortgages and every independent survey taken has shown an exceptionally high level of trust and satisfaction by clients of brokers (higher than that of direct bank customers).
While I understand that this has been written under the title of “opinion” there is still surely a responsibility for the AFR to check the facts and ensure that the article doesn’t mislead and defame 30,000 small business people.
Our industry prides itself on our integrity, low complaint rate and our work with government and regulators to always protect consumers. We are legally obligated to act in the customer’s best interest and this article implies we don’t take that seriously.
In the interests of balanced, ethical journalism, I respectfully request a right of reply that is both in print and online and provides equal exposure.
Here are just a few of the falsehoods in this article presented as fact:
“Customers who favour brokers are typically younger and have a lower income than those who start their shopping with banks.” broker customers are also more likely to be first-time home buyers; in such cases, they work with brokers to bridge a knowledge gap.”– This is incorrect and our research shows this.
“According to mortgage broking industry sources, the average Sydney mortgage broker earns around $400,000 in upfront fees each year. Based on standard broker commission rates, this suggests that the average Sydney broker is pocketing $670,500 a year when trail commissions are included.” – This is not only false and absurd but irresponsible. The average earnings of an individual finance broker is nothing like these figures.
The hefty cost of commissions paid to mortgage brokers means home buyers – those who go through the banks’ branch networks and those who use a broker – are paying more than they should on their mortgages because banks factor the commissions into the pricing of their home loans.” – Totally wrong. If the banks did not pay commission these costs would be incurred by them internally. Clients pay no more and this has been stated by banks and governments.
Because upfront commissions are much larger than trail commissions, mortgage brokers have an incentive to encourage their clients to sell their existing homes and to upgrade to new and more expensive properties.” – This is a scandalous attack on the integrity of mortgage brokers and completely untrue.
“But while the broker pockets higher fees from the increased loan size, their clients are saddled with larger mortgages, and higher home loan repayments.” – Again, false.
“Earlier this year, New Zealand Commerce Commission chairman John Small recommended that the rules around brokers’ disclosure of conflicts of interest should be tightened.” – He has since admitted that he had no knowledge of the system and should not have said that.
“But the opaque nature of the upfront and trail commissions paid to brokers – combined with the fact that they’re paid by the banks rather than the actual borrowers – mean that few borrowers bother to think about how much their broker stands to earn.” – Commissions are transparent and disclosed under law to all borrowers (NCCP).
What do you think about the AFR columns? Comment below.
