The Reserve Bank of Australia (RBA) has received flak from mortgage brokers after it warned that the growing industry heightened risks to the financial system.
Mortgage brokers accused the RBA of not giving out evidence in relation to its claims, when the central bank noted in its semi-annual financial stability review the increasing “use of brokers to about 40% to 50% of new housing loans and the rising commission rates”.
The RBA also cited “other incentives banks pay to brokers”, The Australian reported.
“The more banks use brokers, the greater is the risk that a misaligned broker incentive structure would generate significant amounts of lending that is outside their risk tolerance or is otherwise inappropriate,” the RBA earlier said.
The Mortgage & Finance Association of Australia this week argued that less than 0.5% of brokers had been investigated or convicted by the government of misconduct, “demonstrating the ethical and professional nature” of the profession.
The association added that “in fact, 50.4% of new residential lending was through third-party channels, higher than the RBA’s commentary”.
“There is no evidence that increased use of the broker channel increases risk. This conclusion is clearly based on incorrect assumptions.”