Bank commission cuts have spurred a broker sentiment swing to the non-bank sector.
In a recent Mortgage Business poll, 71 per cent of respondents believed brokers would favour non-bank lenders as a result of the recent bank driven commission cuts.
However, according to Connective principal Mark Haron, reality may differ considerably from the sentiment.
“Emotionally, brokers still want to support the non-bank sector,” he said.
Despite this, Mr Haron believed that in the current market many non-bank products simply aren’t priced as attractively as bank products.
“When it comes down to business, brokers need to choose the appropriate product for their client, and interest rate is a major consideration. When pricing improves I think brokers will support the non-banks as much as possible."
One non-bank lender that has seen sentiment translate into action is GE Money Third Party Solutions (GE Money), which has experienced a surge in applications.
“The recent revamp of our prime range of mortgages Flexible Options – including the re-launch of our low-doc and basic mortgages – has certainly been well received by the market,” said GE Money’s managing director Mark Rice.
“Both are priced very competitively, which is no doubt appealing to brokers, but I believe that our commission guarantee on this product range has also resonated with brokers concerned about mainstream banks’ current commissions restructuring.”
Asked when the non-bank sector as a whole would look to restructure commissions, Mr Rice said it "would depend on market dynamics".
“Non-bank lenders, like banks, are dependent on capital markets and will make decisions based on the need to maintain profitability,” he said.
Brian Jones, managing director of Homeloans Ltd, pointed to disruptions to capital markets as a driver for non-banks to potentially review commissions however he said that other forces were at play.
“Non-banks are more unsettled by the funding cost issue and the resultant de-risking process, so broker commissions – while certainly under close watch – can be dealt with more strategically than via compulsion.”
Mr Jones said that the sector has a 12 month window to re-position itself for the return of normal conditions and capitalise on changed economic structures.
“Current conditions have clearly indicated that the banks are unable to cushion their customers from capital market fluctuations. This flows onto business acquisition costs where the banks have made reductions and the non-banks are still observing.
“The likelihood is that non-banks will have to adjust their offerings but commission is not the only detriment of loan volume.”
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