Mortgage brokers in denial over commission cuts
Wednesday, April 23, 2008/
Mortgage brokers have moved to play down the prospect of another big bank cutting commission rates, despite comments from a leading bank executive that this is on the cards.
CBA chief executive Ralph Norris has said it is just a matter of time before the bank, Australia’s biggest mortgage lender, cuts the commissions it pays to mortgage brokers that sell its products.
“It’s a fact of life that at the moment we are losing money on every loan that goes through the broker,” Norris told The Australian Financial Review. “So there has to be some sharing of the pain. We are looking at it. It’s a matter of if, not when.”
Norris’s comments follow the move by Westpac last week to implement a unilateral 0.2% cut to up-front commissions and 0.1% cut in trailing commissions, triggering an angry response from the broking industry.
But mortgage brokers were this morning keen to play down the significance of Norris’s comments, saying that they don’t reflect their own ongoing negotiations with the CBA.
Paul Lahiff, the chief executive of 450-strong mortgage broking franchise Mortgage Choice, says he doesn’t believe that CBA will cut commissions.
“In our discussions with them they have indicated to us a reluctance to follow Westpac in either the dimension of the cut to commissions or the way they went about it, and we will continue to talk with them about other ways that can improve the profitability of the broker channel,” Lahiff says.
Lahiff refused to say if CBA or other banks have ruled out imposing commission cuts and says he expects a fair bit of “noise” from the banks as negotiations with brokers continue over the next few months about how to deal with the current credit squeeze.
“There will be noise in the industry as they’re about to go into reporting season,” Lahiff says. “This isn’t just going to be a one minute set of negotiations; they will be ongoing and people will position themselves to best affect.”