Mortgage brokering has indeed come a long way in Australia.
We can trace it back to the late 1800’s when the Federal Bank of Australia was established. Just five years down the line after its establishment, Australia legislated the Real Property Act in 1886. This legislation covered key aspects of land and property ownership in Australia. Among the key requirements was that a record was to be made on a registry. It can be deduced that the main purpose of this Act was to reduce the prevailing fraud revolving around land issues that was rampant at the time. Thus, everyone was required to record ownership and all other necessary land details.
After the legislation and enactment of this Act, people were now able to register mortgages and all their rights to a specific property.
This 1886 Act formed an impetus to other Acts along the way.
At 1889, a major property crisis occurred. The Premier Permanent Building Association of Melbourne collapsed. It was considered the largest building society. This was further aggravated by a disparity in the supply and demand of property in Australia. There was an oversupply of property with un-matching demand which was brought about by largely two factors.
High speculation with regard to property
Establishment of many building societies
After the Premier Permanent Building Association collapsed, more building societies collapsed. About 16 small banks in Australia also collapsed in 1891. An apparent banking crisis was looming. The Federal bank itself was considered to be failing by 1893. During this period about 11 large commercial banks had closed down already.
As it was apparent that there was a banking crisis, corrective measures were sought. In 1911, the Commonwealth Bank Act gave rise to the Commonwealth Bank of Australia. This bank brought good tidings with it as it was guaranteed by the federal government. This was in a bid to restore the people’s faith in the banking sector.
There was a recession that took place between 1931 and 1932 which had adverse effects on the economy. In a bid to prevent another recession the financial system became heavily regulated. There was also an increase in the specialization of financial institutions. Thus, businesses were served more by trading banks while saving banks focused serving households.
In 1965, a major milestone was achieved in the Australian Property market. The Housing Loans Insurance Corporation came about. It was mainly mandated to helping homeowners to obtain home loans at fair interest rates. Lenders were offered insurance (presently the Lenders Mortgage Insurance) to cover loss brought about by defaulting borrowers.
It was also in this period where financial intermediaries (brokers) emerged. They were highly unregulated. Even so, they came up to fill a market gap created by a highly regulated banking system. Banks could not offer competitive interest rates and thus mortgage brokers capitalized on this.
In 1980, Mortgage Finance Association of Australia was established to accredit and represent all players in the mortgage industry.
At present, mortgage brokers are regulated by the Australian Securities and Investments Commission. They are also required to be members of the Credit Ombudsman Service Limited. Accredited brokers are also required at times to be members of the Mortgage & Finance Association of Australia.
Mortgage brokers in Australia had their big break in the late 1990s, especially with the Wizard Home Loans and Aussie Home Loans marketing campaign. Most of them do not charge for their services as they are already paid for introducing loans. However, they are paid commissions at a calculated rate that is hinged in the value of the loan.