Westpac Group to introduce new broker remuneration changes
25 October, 2018
Westpac Group has announced it will introduce new changes to how mortgage brokers are remunerated, as part of a move to enhance transparency and customer outcomes.
The changes for Westpac, St.George, Bank of Melbourne, and BankSA will deliver on the commitment the industry has made to improve the existing broker commission model, in line with the mortgage broking Combined Industry Forum principles.
By 1 January 2019, upfront commission payments for standard home loans will be linked to net debt utilisation and inclusive of loan offset arrangements, rather than the approved loan limit.
The amount of upfront commission paid for most home loans will now be calculated as a percentage of the amount drawn down and used by the customer at settlement, excluding any amount which remains in an offset account.
Westpac General Manager Home Ownership, Will Ranken, said: “We know many of our customers value the independent service and advice mortgage brokers provide.
“Westpac Group continues to be an active participant in the Combined Industry Forum and supportive of its work to ensure better customer outcomes.
“We believe the changes we are introducing will be the start of delivering a more transparent commission model that better meets the needs of consumers and industry.
“We remain committed to supporting mortgage brokers to ensure we are providing the right home loan solutions for our customers,” Mr Ranken said.
The new commission structure for standard home loans will also allow for a subsequent upfront commission for when brokers arrange loans for customers with funds held in offset accounts for a short term future purpose like renovations.
The changes will mean if a customer takes out a $400,000 home loan and purchases a property for $350,000 and puts $50,000 of that loan into an offset account, the broker will be paid an upfront commission based on the $350,000 amount.
If the customer then draws down the $50,000 in the offset account in the twelve months following settlement, the broker will receive a subsequent upfront commission calculated on the $50,000.
In addition, Westpac Group will implement improvements to increase the transparency of customer disclosure of the commissions mortgage brokers receive, including providing details of how the commission paid to mortgage brokers will be calculated.
The new changes will also see brokers having access to priority service arrangements for their customers if they consistently meet quality loan application measures.
There will be no requirement for brokers to meet any dollar volume business threshold to access these new arrangements.
Westpac Group is a member of the Combined Industry Forum, which is committed to implementing six principles to ensure better consumer outcomes. This includes preserving and promoting competition and consumer choice, and improving standards of conduct and culture in mortgage
The changes to commission calculations do not apply to Construction Loans, Equity Access Loans or Portfolio Loans as the commissions for these products remain unchanged in-line with the Combined Industry Forum recommendations.
The changes to the commission model and service model will take effect by 1 January 2019. Changes to make commission payments more transparent to Westpac Group customers will start being made in February 2019.