Letter to AFR from FBAA

Please find below a letter from Peter White AM, managing director of the Finance Brokers Association of Australia (FBAA) that was sent to key editors at the Australian Financial Review this morning:

 

Letter to AFR – 27 May 2024

 

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 per cent 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).

I await your urgent response.

Regards,

Peter White AM

Managing Director

Finance Brokers Association of Australia

Level 1/1 Miles Platting Rd
Eight Mile Plains QLD 4113