AMP Bank has revealed that, effective for loans settled from January 2019, it will be calculate broker commissions for its home loans on the net balance, instead of the total approved facility amount, via The Adviser.
The bank becomes the third large lender to change the upfront commission structure to the new model in the past few weeks, after NAB and Westpac announced similar changes.
The bank outlined that it had made the changes “in line with Sedgwick recommendations” from his Retail Banking Remuneration Review (which helped form the basis of the Combined Industry Forum’s reform package).
Mr Stephen Sedgwick AO recommended in his report last year that remuneration should not “directly link payments to loan size”, suggesting that alternative payment arrangements could include: commission based payments that take the loan to value ratio (LVR) or the loan type, or “the quality of the advice given to the customer into account; and, preferably arrangements between lenders, mortgage brokers and aggregators that are not product based such as lender-funded fees for service”.
Speaking of the changes, an AMP Bank spokesperson said that the change “centres on ensuring customers obtain loans that are appropriate for their needs and objectives”.
The spokesperson continued: “Brokers and advisers play a vital role in our community, providing more than 50 per cent of all home loan applications and the portion of the market they service continue to grow, reflecting the important service they provide.
“Like brokers and advisers, AMP Bank is committed to ensuring we continue to deliver good customer outcomes so we’re making some changes to the way commissions are calculated for home loans.
“These are changes that have been committed to by the industry and we have announced the detail early as we think it’s important to give brokers and advisers early visibility of the changes.”
Lenders expected to make changes by the end of the year
NAB became the first major lender to implement the recommendations from the ASIC and Sedgwick reviews, which were backed by the Combined Industry Forum package of reforms.
Its white label brand, Advantedge (and Advantedge-funded brands, such as Homeloans) announced the same changes in tandem, and Westpac announced earlier this week that the bank and its subsidiaries (St. George, Bank of Melbourne and BankSA) will link upfront commission payments for standard home loans to net debt utilisation and inclusive of loan offset arrangements, rather than the approved loan limit, effective 1 January 2019.
The CIF recently hosted an event which further outlined its work on mortgage broking reforms and reiterated that lenders are expected to make the remuneration changes by December 2018
