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Banks pull the broker lever as APRA pressures mount

by James Mitchell5 minute read
mortgage lending, rate hikes, broker client

In addition to rate hikes and policy changes, brokers are proving to be a convenient lever for the banks to pull as they strive to meet APRA’s limits on mortgage lending.

Banks are now approaching broker clients with owner-occupier home loans to refinance as they look to rebalance their mortgage portfolios and limit investor and interest-only lending.

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In a recent The Adviser survey, brokers who had experienced channel conflict were asked which type of loan their clients had been approached by their bank to refinance.

Almost 74 per cent of brokers said clients with owner-occupier mortgages had been targeted. The survey also found that 84 per cent of the 766 brokers surveyed claimed the major banks and their subsidiaries had directly approached their clients to refinance over the last 12 months.

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The figures come as Australian banks face ongoing pressure from the prudential regulator to cap investor lending growth at 10 per cent and limit the interest-only loans as a proportion of all new lending to 30 per cent.

Commenting on The Adviser’s channel conflict survey results, Digital Finance Analytics principal Martin North said banks are currently “powering up” their acquisition of owner-occupier loans to offset a reduction in investor and interest-only lending. He said this is being done through their proprietary channels “at the expense of brokers”.

Earlier in the year, CBA stopped refinancing investor mortgages through the third-party channel. Any CBA customers with an investor home loan looking to refinance would have to visit the bank directly.

“Two or three months ago, CBA said they were really looking to drive more momentum through their branch channels and offset the volumes through brokers. Westpac also showed in their latest results a little bit of a fall in broker momentum,” Mr North told The Adviser.

“There is a change of strategy from these lenders. They are less willing to take business from third-party channels for that particular category because they are trying to control the volume of those particular loans at the moment, thanks to the imposed speed limits and the need to reduce interest-only loans. It is a way of giving priority to their own channels,” he said.

Morningstar expects that a change in the broker strategies of Westpac and CBA in recent months could have a detrimental impact on broker market share.

“Changes in mortgage distribution strategy by Australia’s two largest mortgage banks CBA and Westpac will over time likely slow the growth rate of home loans sourced through brokers,” Morningstar analyst David Ellis said in a recent research note. 

Over the last year 84 per cent of brokers have had one or more of their clients approached directly by their lender to refinance. Over 47 per cent of brokers admitted they had lost commission through clawback as a result of a client being refinanced by the lender directly.

However, despite these findings, MoneyQuest managing director Michael Russell is adamant that channel conflict is not a systemic issue.

“Under no circumstances have I witnessed any systemic channel conflict condoned by a lender," Mr Russell told The Adviser. “I just have not witnessed it."

[Related: Broking boss dismisses channel conflict]

Banks pull the broker lever as APRA pressures mount
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James Mitchell

James Mitchell

AUTHOR

James Mitchell has over eight years’ experience as a financial reporter and is the editor of Wealth and Wellness at Momentum Media.

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