Sydney Property Market Update 09/02/2019
After a huge amount of fanfare, the recommendations of the Hayne Royal Commission into Banking were handed down - all 76 of them.
My feeling? On the whole, disappointed.
I sense this was a missed opportunity to totally recalibrate the way banking operates in this country. Instead I fear it will pretty much be business as usual for the big four, in particular.
You only have to look at the fact that bank share prices rose significantly afterwards to know what the financial sector thought. That's akin to bookies at a race track lowering the odds on a horse because they feel it is even more favoured to win now.
There are two main areas where I was most disappointed.
The first was the opting out of effecting any meaningful immediate change by simply giving more powers to the two regulatory bodies who were at the wheel when most of these atrocities were happening. I feel the Australian Prudential Regulation Authority (APRA) has at the very least done its job over the past few years, which is to control and direct the banks in the way they offer and administer services to their clients. Yes, I know there have been some woeful stories of predatory behaviour towards various members of the general public but to be fair that isn't APRA's main role.
You only have to read their mission statement on the front of their website to understand their main responsibility. It states and I quote they "supervise institutions across banking, insurance and superannuation and promote financial system stability across Australia".
The Australian Securities and Investments Commission (ASIC) on the other hand has a lot more to answer for. They are principally the ones who prosecute the big banks when customers are treated so abhorrently. On that front they have been very poor. When I hear of how many "enforceable undertakings" were struck with the banks where the offending party had a say in what punishment would be administered (how ridiculous is that ?) it doesn't fill me with hope or confidence that a body with this track record is going to perform any better with increased powers.
The second area I feel the Royal Commission has got it wrong clearly is in the recommendation of mortgage broker fees being paid by the customer rather than the banks.
On face value this appears to be a much fairer system. In reality though what it will do is drive more loans directly to the larger banks. Some have predicted as much as 80% of the mortgage broker market will perish if this recommendation is past on in full.
And yes I know there are many unscrupulous and incompetent brokers out there who take advantage of their clients by only steering them to products that suit their own personal needs first. But just like the "dodgy" plumber, "dishonest" real estate agent, "corrupt" police officer, "biased" judge, "unethical" politician, etc. they are a distinct minority overall and passing legislation which weeds them all out at the expense of almost the entire industry appears to be draconian at best.
Many customers fail to know what are the best mortgage products out there and a good broker impartially offers them without prejudice. If you go directly to a bank this will simply not happen. They will only offer you the loans they house and many clients will settle for this either unaware or unwilling to put the extra time in to source a better outcome.
I'm very happy to hear your feedback, particularly if you disagree with any of my comments above. Feel free to email me with your thoughts and I will report them all next week.
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