An association representing mortgage brokers promised Friday to oppose in the "strongest possible way" Ottawa's plans to apply the goods and services tax to their profession. 

Jim Murphy, CEO of the Canadian Association of Accredited Mortgage Professionals, told CBC News it's "still not completely clear" whether imposing the GST would affect house prices.

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Mortgage brokers are vowing to fight Ottawa's proposal to broaden application of the GST to financial services. ((CBC))

In its budget earlier this month, Ottawa served notice of plans to broaden the application of the GST on financial services that had previously been exempt.

The services affected include those provided by mortgage brokers, investment dealers, financial planners and insurance advisers.

Ottawa has changed the definition of taxable financial services to include those that "facilitate" or "prepare," and which is expected to include some commissions paid to mutual fund dealers, car dealers, and telemarketers.

Those services were made exempt when the GST was introduced in 1991.

Murphy said his association, as well as those representing the other professions, have provided information to Flaherty's office and to the Canada Revenue Agency on how their members would be affected.

And each profession stands to be affected differently.

"We are all seeking clarification in terms of how it would affect our various professions," Murphy said.

Out of brokers' commissions

It appears, he said, that in the case of mortgage brokers, the tax would come out of the commissions now paid by banks and other lenders paid to those brokers.

That could potentially reduce those commissions by as much as 13 per cent in Ontario or 12 per cent in B.C., once those provinces adopt their harmonized sales tax (HST) in July.

The lowest hit would be in Alberta — where there is no provincial sales tax — but it would still be five per cent. Whether the broker would be able to pass that along to the homebuyer would depend on the degree of competition in the local market, Murphy said.

"The other option is that the mortgage broker tries to pass those costs along to the consumer, to the borrower, and that obviously is adding to costs," said Murphy. "That makes the mortgage broker … uncompetitive versus other distribution channels for mortgages."

He said he was hopeful that Ottawa would not proceed with the changes.

"We're cautiously optimistic that they will listen to what the negative consequences of such a change would be," said Murphy, "and that they will continue with the current status quo."