Industry backs broker channel despite lender withdrawals

Other lenders that have recently gone the same route include HSBC, Integris and the Bank of Queensland (BoQ).

Mark Hewitt, head of sales and operations at Australian Finance Group (AFG), said the decisions to withdraw were “purely a readjustment of the market”.

Dividing the lending industry into three tiers – the big banks, medium-sized lenders and smaller, niche players – Mr Hewitt said recent withdrawals had been limited to third tier smaller players.  

“There may be a few more minor changes on the cards but I think it’s mostly going to be from those smaller lenders that have never had a huge presence in the broker channel anyway,” he said.

Mr Hewitt said lenders looking to arrest declining profits by withdrawing from the broker channel would be better off focusing on improving their loan processes.

“Efficiency is still a major issue in this industry and I think there are still a lot of technological improvements to be made and plenty of scope for lenders to reduce cost pressures this way,” he said.

Tim Bolton, director of brokerage Mortgage Solutions Australia, said he was confident brokers would maintain a strong market position despite the recent exits of some players from third-party distribution.

 “Mortgage consultants [brokers] have been in this industry for a good while now. They bring a great value proposition to the table and I think borrowers recognise this,” Mr Bolton said.

CUA has also come out in support of the broker channel – despite its decision to stop offering products via third-party distribution.

CUA's general manager of member relationships and advice Andrew Hadley said the credit crunch had reduced the profitability of third-party distribution for CUA to a point where it was “simply no longer viable”.

“I would be very surprised if CUA were the only ones affected by the current credit conditions,” he said.

“However I’ve no doubt the broker channel will continue to be a significant part of the mortgage industry.”

On whether CUA would re-enter the broker channel, Mr Hadley said: “Never say never. However we wouldn’t consider it until there are changes in market pricing.”

“I think there’s certainly opportunity for CUA to go back to the broker channel; we haven’t burnt any bridges.”

Group executive of people and corporate services at BoQ Daniel Musson said that BoQ’s decision to pull out of the broker market in June 2004 had “been a strategy that had worked well”.

However he would not be drawn on whether it would work for other lenders.

Published: 23-04-08