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In a plot twist no one saw coming, the Australian economy barely budged in the June quarter, with the GDP inching up a whopping 0.2%. Federal Treasurer Jim Chalmers, stating the obvious really, confirmed that Australians are indeed tightening their belts, as soaring home loan costs have meant that after making loan repayments, there isn’t a lot of surplus money available to spend for many Australians.
The latest ABS data revealed that without government spending, the economy would’ve flatlined. Despite 11 consecutive quarters of GDP growth, the per capita figures have taken a nosedive for the sixth time in a row.
Household spending fell by 0.2%, and even essentials like groceries weren’t immune. Savings? Don’t even ask. At a meager 0.9%, it’s the lowest since 2006.
Chalmers, like any good politician would of course, insisted this all “justifies” the government’s master plan to fight inflation. After all, what’s a little belt-tightening when you’re saving the economy, right?
In this week’s newsletter, we take a look at the current state of home loan commission clawback.
As you’re probably aware, we do not charge our clients a fee for our service, with our revenue being derived via commission that lenders pay us for placing business with them.
Note – most lenders pay the same commission, so there is generally no financial incentive for us to favour one lender over another.
A commission clawback for brokers on home loans refers to a situation where a lender requires a broker to return (or “claw back”) part or all of the commission we are paid for arranging a home loan for a client. This usually happens if the borrower pays off the loan early or refinances with another lender, typically within the first two years.
The clawback period and terms can vary between lenders, but the rationale is that the lender may not have made enough profit on the loan in that short time to justify paying the full commission. Clawbacks are designed to protect lenders from losing money on early exits while ensuring brokers have an incentive to secure long-term loans for their clients.
Whilst the notion of clawback is to protect the lenders interests, it’s use as a disincentive is not in the best interests of the borrower.
Recently many lenders are revising their clawback policy’s. It wasn’t long ago that the big banks wanted 100% of the commission back if a borrower moved away with the first 2 years, however they are gradually softening their stance.
As of this week, the big four banks had the following clawback provisions in place –
ANZ
0-12 months: 100 per cent
12-15 months: 50 per cent
15-18 months: 25 per cent
19 months+: 0 per cent
CBA
0-12 months: 100 per cent
12-13 months: 50 per cent
13-23 months: Staged – drops every month by around 4 per cent.
24 months+: 0 per cent
NAB
0-12 months: 100 per cent
13-24 months: Staged – drops every month by 4 per cent.
25 months+: 0 per cent
Westpac
0-12 months: 100 per cent
12-18 months: 50 per cent
19 months+: 0 per cent
Non-bank lenders, meanwhile, have been removing clawbacks on some of their products completely.
Variable
The rates below are based on a $500,000 loan, with the borrower making principle and interest payments with a loan term of 30 years. The rates quoted may vary depending on the borrowers LVR.
1 Year Fixed
The rates below are based on a $500,000 loan, with the borrower making principle and interest payments with a loan term of 30 years. The rates quoted may vary depending on the borrowers LVR. At the end of the three year fixed period, the borrowers interest rate will revert to a standard variable rate for the life of the loan.
