Thousands of Australian mortgage brokers may continue receiving trail commissions beyond next year, after the federal government backflipped on getting rid of them.
Abolishing the trail commissions - which involve a fee being paid for a broker's services for the duration of a property loan - was among recommendations of the banking royal commission.
The government had vowed to grandfather existing trail commissions and abolish new ones from July 2020.
But after speaking with mortgage brokers and small lenders, Treasurer Josh Frydenberg revealed on Tuesday the government had changed its mind.
The issue will instead be reviewed in three years time by the competition watchdog and financial regulators.
Dumping the reform has further distinguished the coalition's position on mortgage brokers from that of Labor.
The opposition has committed to abolishing trail commissions if it wins the next election and has vowed to cap mortgage broker fees at 1.1 per cent of a property loan.
The treasurer argues that will reduce competition.
Royal commissioner Kenneth Hayne also recommended making borrowers, rather than lenders, pay upfront fees to mortgage brokers, but both sides of politics have baulked at the idea.
Labor confirmed on Tuesday that would be the only one of the royal commission's 76 recommendations it won't implement if it wins the next federal election.
Opposition's financial services spokeswoman Claire O'Neil said Labor is still dealing with the problem raised.
There are 16,000 mortgage brokers across Australia - employing more than 27,000 people - who settle about 60 per cent of all residential mortgages.
The opposition also wants to pursue broader changes to regulations in the financial services sector, believing the complex web of laws and structures needs to be simplified.
