The report recommended abolishing trail commissions and up-front commissions over two-to-three years, resulting in brokers being paid by borrowers, rather than lenders.

Bank of us chief executive officer Paul Ranson described the changes as “radical” that could hurt smaller players.

“The broker network is an important channel for smaller lenders,” he said.

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“If borrowers, not lenders, are to pay a fee for arranging a loan it is important that this does not adversely impact competition in the home lending market.”

The peak body for mortgage brokers, the Finance Brokers Association of Australia, was scathing of the recommendations which it claimed would be passed on to the consumer through higher up-front fees, while independent brokers would struggle.

Commissioner Kenneth Hayne described the fee as “money for nothing” for brokers and believed the fees should be abolished.

Labor has agreed to implement all recommendations, while the Coalition stopped short of agreeing to abolish up-front commissions.

About 60 per cent of mortgages come via mortgage brokers.

Despite fears for the mortgage lending industry, smaller banks could see an overall benefit from the royal commission.

The Customer Owned Banking Association found that during the royal commission, about 8 per cent of customers had changed their banks – particularly to smaller players.

Mr Ranson said their competitors needed to shift “from a culture that places shareholders first, to one that always has the customers’ best interests at the fore”.

He said Bank of us had experienced growth as a result of the royal commission.

“We have enjoyed excellent growth in the past 14 months since becoming a bank and, anecdotally, many of our new customers have come to us from the Big 4,” Mr Ranson said.