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 believe commissions will fall, 21 per cent anticipate cuts within the next six months while 36 per cent expect them within 12 months. The remaining 17 per cent predict cuts within a few years.
Only 26 per cent of those surveyed do not foresee any changes.
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Aggregator groups and brokerages have been quick to dismiss the prospect of reduced commissions however, arguing that lenders will recoup compressed margins through other channels.
“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, said brokers were 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 to brokers as an example of how lenders are reducing overheads.
The Mortgage Gallery’s managing director John Bignell is also unconvinced that lenders will reduce commissions substantially, but concedes some changes could be unavoidable given 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 said he was confident brokers would not necessarily desert lenders that made the decision to reduce commissions. But he warned that in situations where a broker was faced with a choice between a number of comparable products, “it would only be human nature that the broker would probably opt for the better commission”.
