Shares in Australian mortgage broking companies are getting destroyed

Shares in the major banks on the Australian share market are surging today, in a “relief rally” following the release of the final report of the financial services royal commission.

But mortgage broking companies are getting annihilated. The business model for mortgage brokers that involves taking commissions from banks on loans looks set to be torn apart, with the inquiry recommending the abolition of trailing commissions and, over three years, the removal of all commissions by lenders to brokers.

Instead, Commissioner Kenneth Hayne recommended that people using a mortgage broker pay a fee to the broker, with the intent being to align the interests of the broker to their customer.

Mortgage brokers are furious and say this will likely push up the cost of loans to borrowers — that is, effectively increase interest rates.

As the charts below from Yahoo Finance show, shares in Australian Finance Group crashed 30% at the open…

Yahoo Finance

… and Mortgage Choice also crashed around 30% before recovering to be down a 25% a short time ago.

[“source=businessinsider”]