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Broker commission cuts expected

Staff Reporter 4 minute read

Wide-scale reductions to broker commissions could be on the cards according to the results of a recent Mortgage Business straw poll, but aggregator groups remain defiant.

Of the 74 per cent of respondents that believed commissions will be reduced, 21 per cent anticipated changes within the next six months and 36 per cent expected to see reductions within 12 months. The remaining 17 per cent predicted cuts within a few years.

Only 26 per cent of those surveyed did not foresee any changes taking place.

Aggregator groups have been quick to dismiss the prospect of commission reductions however, arguing that lenders will recoup compressed margins through other channels.

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“I just don’t believe that it will happen,” said managing director of Bernie Lewis Home Loans Mark Lewis.

“We might see lenders fiddling with claw-backs and commission structures, but too many rely on brokers too much to cut them out of the picture,” he said

Jennifer Nielsen, chief executive of x inc, also believes that brokers are too highly valued by lenders to have their commissions cut back.

“To say that lenders will reduce broker commissions significantly undervalues the relationship between lenders and brokers,” Ms Nielsen said.

“Clearly lenders need to maintain margins but they will do this in other ways – and we are already starting to see this evolve,” she said, referring to the transfer of certain processes over to brokers as a way in which lenders are cutting overheads.

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The Mortgage Gallery’s managing director John Bignell is also uncertain that lenders will reduce commissions substantially, but concedes that some changes could be unavoidable considering the changing market conditions.

“Pain is being felt right across the Australian community right now and there’s no doubt lenders in particular are feeling the pain from the rise in lending costs,” Mr Bignell said.

“Nobody would want to see it happen – and I’m not sure if it will – but I suppose we need to put ourselves in the lenders’ shoes and ask ‘if I were them what would I do?’.”

Mr Bignell is also confident that brokers wouldn’t necessarily desert lenders that decided to cut back on commissions. However he warned that in situations where a number of products were on par, “it would only be human nature that the broker would probably opt for the better commission.”

Published: 10-03-08

Broker commission cuts expected
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