Mortgage brokers have spoken out about an alarming and evolving threat driven by strong competition in home lending that is increasingly eating into their profits.

A handful of brokers admitted to The Adviser that channel conflict is rife in the industry.

Top Mortgages finance broker Mike Watts said channel conflict not only still exists but has “evolved over time” and is presenting a “new threat to mortgage brokers”.

“Recently we have seen lenders (via their direct sales channels) target accountants or real estate agents and offer them financial incentives to refer business,” Mr Watts said.

“I believe that such payments being made by lenders has the potential to undermine the broking channel by effectively turning traditional referral sources into sales representatives for the bank, and bypassing the advice and range of choice a qualified, licensed and experienced mortgage broker can offer.”

The Perth-based broker pointed out that second-tier lenders, “normally the strongest supporters of the broker channel,” are also behind this practice.

“This can undermine valuable referral networks that a broker has built over time,” Mr Watts said.

Credo Financial Group director Nathan Taddeo said that bank branches, in particular, are a major source of conflict.

“I’ve had situations where clients have gone into a branch to take out money, cash or cheque or whatever it might be. The teller will speak to them, ask them about their loan and if they’ve been thinking about buying a house. From there the business has been taken away from me, rewritten within the bank,” Mr Taddeo said.

“Last week alone I had two or three situations where clients were coming back to me with offers from branches that I couldn’t get matched. These were the big four ones obviously.”

Tungsten Home Loans national finance manager Brad Quilty said that some lenders and phone staff seem to take issue with brokers, “whether it’s claiming that the broker didn’t set up the loan correctly, didn’t fill in some other paperwork property, or any other wild claim that we have done badly by our mutual clients”.

“The bad mouthing and loan refinancing is just not conducive to a professional working relationship,” Mr Quilty said.

However not all brokers experience ongoing channel conflict issues.

FrontRunner Finance Solutions mortgage broker Laurie Parkes said that he hasn’t had a loan taken from him for many years.

“If anyone’s going to be blamed for that, that’s the broker’s fault for not keeping in contact with his clients,” Mr Parkes said.

[Related: Broker calls for standardised commissions]

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