Thousands of Australian mortgage brokers may continue receiving trail commissions beyond next year, after the federal government backflipped on getting rid of them.
But the sector says uncertainty remains about how the commissions will work after the election.
Abolishing the commissions for a broker's services during a property loan was among the recommendations of the banking royal commission.
The government had vowed to exempt 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, fearing the impact the move could have on competition.
The issue will instead be reviewed in three years by the competition watchdog and financial regulators.
"What we're very concerned about is ensuring that mortgage brokers continue to be a critical part of our residential mortgage market," Mr Frydenberg said.
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.
But Labor has accused the Morrison government of lacking the mettle to deal with the situation.
"It's just all in the too-hard basket," shadow treasurer Chris Bowen told reporters in Sydney on Wednesday.
Under the coalition, the business model for mortgage brokers would remain in "limbo" until it is reviewed in three years, Mr Bowen said.
The peak body representing the sector says the Morrison government's backflip is a "step in the right direction".
But Finance Brokers Association of Australia Peter White said the industry is still feeling unsure about its future.
"The coalition's announcement to keep trail commissions has been delivered in a pre-election environment so uncertainty remains about how exactly this will work after the election," he said.
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.
There are 16,000 mortgage brokers across Australia - employing more than 27,000 people - who settle about 60 per cent of all residential mortgages.
