The operations of 20,000 small businesses and sole traders will be factored into the Liberal Party’s plans to enact key recommendations from the banking royal commission, according to federal treasurer Josh Frydenberg.
Commissioner Kenneth Hayne proposed major changes to the way mortgage brokers are remunerated and regulated in his final report for the royal commission.
One of the key recommendations was to abolish trail commissions for mortgage brokers, meaning a big hit to brokers’ income. The Liberal party was originally going to support this proposal for new loans, but has since softened its position, in part due to the impact on the SME community.
“Mortgage brokers are overwhelmingly in small business,” said Mr Frydenberg this morning, in an address to housing industry professionals.
“Seventy-five per cent are sole traders,” he said.
“We don’t want to see mortgage brokers put out of business,” he said.
Brokers also play a critical role in generating competition, which is particularly pertinent for SMEs at a time when access to credit is becoming increasingly difficult.
"The reason is that mortgage brokers play an absolutely critical role in our economy and they help generate competition in that market and we don’t want to see mortgage brokers put out of business with, effectively, their business just migrating to the big banks,” Mr Frydenberg said.
As it stands, the Liberal party will introduce a best interests duty for mortgage brokers, and review broker remuneration models in about three years.
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