After months of speculation Westpac has broken ranks from the big four banks and reduced broker commissions.
The bank will cut upfront commissions by nearly 29 per cent to 50 basis points, with trail commissions slashed by 40 per cent to 15 basis points.
The bank has not yet made an official announcement on the timing of the cuts, but reports suggest they may take effect as early as May.
Speaking exclusively with Mortgage Business, a Westpac spokesperson said the changes were a “regrettable”, but unavoidable result of current market conditions and emphasised that the bank remained “committed to the broker channel”.
Reaction to the cuts from the aggregation sector has been one of surprise.
“It’s a bit desperate,” Challenger Mortgage Management general manager of broker platforms Alex Moulieris told Mortgage Business.
According to Mr Moulieris the Westpac announcement to cut commissions came without warning.
“No consultation, no discussion – we were just called in and told,” he said.
However Mr Moulieris confirmed that the aggregation industry had been in discussion with other lenders concerning the impact of funding costs.
“There’s no doubt funding costs have gone through the roof – they [lenders] have not been able to pass on all of those costs to borrowers, so there’s pressure on all lenders,” he said.
“We’re in discussion with all lenders to see what we can do to help relieve the pressure.”
Westpac’s spokesperson said the bank was currently in the process of formally communicating the changes to the industry.
While market conditions have forced Westpac to cut commissions, it’s unclear whether other lenders will follow suit.
“There is no evidence to indicate that other lenders will follow Westpac’s unilateral action at this stage,” said Warren O’Rourke, Mortgage Choice’s national corporate affairs manager.
“The mortgage market is very competitive. The banks will be under increasing pressure to deliver in terms of broker remuneration,” he said.
Managing director of Smartline Chris Acret agreed that it was unlikely the industry would see a flock of lenders making similar changes to commissions.
“It’s very early on to say whether other lenders will also reduce commissions; only time will tell,” he said.
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