The Motley Fool

Why the AFG share price and mortgage broking industry is getting smashed today

The mortgage broking industry looks the biggest victim of the Royal Commission this week as shown by today’s 32% fall in the Australian Finance Group Ltd (ASX: AFG) share price.

It’s no surprise Hayne has singled out some of the fee-gouging business models of the mortgage broking industry that bring little value to consumers other than charging them additional fees to arrange a home loan with a bank such as Westpac  (ASX: WBC).

In particular the Royal Commission has recommended banning trailing commissions from lenders to mortgage brokers for loans issued from 1 July 2020 and instead forcing them to take fees upfront.

It seems Commissioner Hayne has recognised that trailing fees mean the longer a loan the greater the potential recurring commission to a mortgage broker, although a longer loan may not be in the best financial interests of the borrower.

For its part the mortgage broking industry including AFG, Yellow Brick Road Ltd (ASX: YBR) and Mortgage Choice Limited (ASX: MOC) (down 23% today) claims that it lowers costs and increases choice for consumers by acting as a middle person between a lender and borrower.

This is only true though if a borrower does not have the capacity or time for whatever reasons to arrange their own loan directly with many free online services such as iSelect Ltd (ASX: ISU) and Canstar helping make this process easier in 2019.

OUR #1 dividend pick to grow your wealth in 2019 is revealed for FREE here!

Our top dividend stock pick for 2019 currently boasts a 5.4% dividend yield (fully franked). I believe it’s a perfect fit for a well-diversified, income-focused portfolio.

Even better, this yield comes attached to an attractive and still-growing business which could keep expanding throughout Australia and New Zealand for years to come. With disciplined management, and a long track record of building wealth for shareholders, this company is a serious candidate for any income-minded investor’s portfolio.

Simply click here to grab your FREE copy of this up-to-the-minute research report on our #1 dividend share recommendation now.

Motley Fool contributor Tom Richardson has no position in any of the stocks mentioned.

You can find Tom on Twitter @tommyr345

The Motley Fool Australia has no position in any of the stocks mentioned. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

NEW. Five Cheap and Good Stocks to Buy in 2019…

Our Motley Fool experts have just released a brand new FREE report, detailing 5 dirt cheap shares that you can buy today.

One stock is an Australian internet darling with a rock solid reputation and an exciting new business line that promises years (or even decades) of growth… while trading at an ultra-low price…

Another is a diversified conglomerate trading near a 52-week low all while offering a 2.8% fully franked yield…

Plus 3 more cheap bets that could position you to profit over the next 12 months!

See for yourself now. Simply click the link below to scoop up your FREE copy and discover all 5 shares. But you will want to hurry – this free report is available for a brief time only.