Fairer regulation, lower refi friction, proportional CSLR top the list
The Mortgage and Finance Association of Australia (MFAA) has outlined its May Budget wish list in a newly published 2026-2027 Pre-Budget Submission, with greater home lending competition and fairer broking industry regulation featuring prominently.
“The 2026-27 Budget presents an opportunity to move beyond short-term relief measures and focus on practical reforms that improve outcomes for households and small businesses,” said MFAA chief executive Anja Pannek (pictured).
Removing refi friction
Amid cost-of-of-living pressures and stretched housing affordability, the MFAA would like to see less friction for borrowers seeking to refinance onto a better deal.
“While borrowers are increasingly willing to switch lenders in search of better outcomes, they continue to face unnecessary friction in doing so,” read the submission.
While easing serviceability pressures in 2025 have helped get borrowers out of “mortgage prison”, the MFAA is concerned that a new wave of interest rate hikes from the Reserve Bank of Australia (RBA) could see a trend reversal.
The RBA raised the cash rate by 25-basis-points to 3.85% earlier this week, with analysts split on whether more hikes are on the horizon.
“In these conditions, policy settings that inhibit switching risk undermining competition at precisely the time it delivers the greatest benefit to consumers,” said Pannek.
Access to a qualified expert such as a mortgage and finance broker “is now more critical than ever”, Pannek said. But she raised concerns that mortgage brokers “are navigating layered regulation and rising regulatory costs, which affect their ability to support clients effectively”.
As such, the MFAA is advocating for a “proportionate and risk-aligned” application of the Compensation Scheme of Last Resort (CSLR), which is an industry-funded scheme to compensate victims of financial misconduct.
CSLR should only be a backstop
A substantial CSLR shortfall was declared last November, leading the government to think up ways to cover costs. The broking industry is concerned that brokers will be unfairly called upon to cover the shortfall, despite contributing a negligible number of financial misconduct claims.
“Any increase (to the CSLR levy) is wrong, it shouldn’t happen, it’s not our fault,” said Peter White, managing director of the Finance Brokers Association of Australia (FBAA), last December. “It should be purely borne by those that caused the problem… it’s simply not the credit sector’s problem, so why is it bearing one cent of this?”
The MFAA wants to see professional indemnity insurance as the primary risk-management mechanism in the broking industry, “with the CSLR acting as a genuine backstop”.
It is recommending that the CSLR levy design aligns costs “with demonstrated risk and avoids cross-subsidisation that weakens incentives to address underlying risk drivers”.
“Brokers translate complex policy and regulations into real outcomes that support competition, choice and access to credit,” noted Pannek. “Mortgage brokers have very low CSLR claims, and regulatory costs should reflect that. Risk-aligned levy settings are essential to protecting consumers without placing unnecessary costs on broker businesses.”
Reducing complexity
The MFAA is calling for clearer, more coordinated regulation that protects consumers without imposing unnecessary complexity and cost, particularly on small businesses.
Per the submission: “Regulation plays an essential role in protecting consumers and maintaining market integrity. To be effective, however, regulatory frameworks must be proportionate, well-sequenced and aligned to risk.
“Where regulation becomes overly complex, duplicative or poorly coordinated, it can undermine confidence, dampen investment and reduce productivity, particularly for small businesses.”
The MFAA drew attention to the application of payroll tax, noting that differing state and territory approaches create heavy administrative burdens for firms operating across jurisdictions.
It would like to see stronger federal leadership to drive national consistency, simplify compliance and support better employment and investment decisions.
“There is also scope to resolve residual issues from post-Banking Royal Commission legislation and simplify obligations where outcomes can be achieved more efficiently,” added the MFAA.
“Targeted refinements, such as improving transparency within the reportable situations regime and legislating clarity around streamlined design and distribution obligations (DDO) for brokers subject to Best Interests Duty, would reduce uncertainty and duplicative compliance without weakening consumer protections.”
“It’s important that we continue to represent the industry through these submissions,” Pannek said. “It’s through our advocacy work and sharing the voice of the broker at the highest levels of government that we can achieve positive outcomes that drive our industry forward.”
