If you aren’t fully across what The Royal Commission means for you, or what it even is, you aren’t alone.
It’s a considerable development in the financial industry for all involved, let alone those potentially affected.
Established in late 2017 after years of public pressure from whistleblowers, consumer groups, the Greens, Labor, and MPs, The Royal Commission will investigate cases of misconduct and malpractice in the banking, superannuation and financial services industry, with a final report by the commissioner due in February 2019.
What's happening with the investigation?
Along with public hearings on a wide range of issues relating to insurance, superannuation, and home loans, there is an online form available to assist people wishing to make submissions of misconduct against the financial services industry.
So far, there have been five rounds of official hearings, and 7,961 submissions received, with the top three industries of alleged misconduct being banking, superannuation and financial advice.
The top four Australian banks all been implicated in serious scandals and exposés in recent years, from evidence of profit-driven business models to quietly paying out compensation for poor financial advice resulting in the commission having a lot on its plate.
But what does this all mean for real estate?
Banks are dotting their i’s and crossing their t’s, taking their time and acting cautiously to avoid further scrutiny during this intense period of investigation.
There is considerable evidence of home loan growth slowing down since the commission began, due to banks tightening their standards. Buyers in need of a mortgage may find it more difficult, as banks are less likely to say yes to borderline customers who may have previously been given the green light.
The top four banks have warned that homeowners could face higher interest rates as a result of the commission, as bank funding costs could rise due to offshore investors taking a more cautious view of Australia’s current climate.
What do we think?
Place Bulimba agent, Simon Dean provides his insight. “There appears to have been a shift in mindset from both sides of the market following the commencement of the Royal Commission. Buyers are seemingly more conservative with their offers, while sellers are more wary of accepting offers carrying lengthy financial causes.”
This all comes after several real estate financing regulations were bought in over the past year, including stamp duty changes, first-home buyer incentives, and plans for new money laundering regulations.
However, it’s not all doom and gloom. There are considerable positive outcomes of all of this, with current decisions made by banks being closely monitored. This means that any major increases in rates and pricing will have to be heavily evidenced and justified to avoid further criticism.
Banks are being given a rare opportunity to make fundamental changes, hopefully in the best interest of both their customers, and their shareholders.