Some mortgage brokers could fold as lenders withdraw products from the mortgage broker channel – in an attempt to minimise the impact to their bottom lines of the squeeze on international credit markets.
Credit Union Australia, Australia’s largest mutual financial institution, yesterday announced it is withdrawing its home loans from mortgage brokers because of the increased cost of finance on wholesale markets.
Credit Union Australia managing director Graham Olrich says while the CUA will be sacrificing the 30% of business home loan volumes that have come via brokers, it will “make up the shortfall with further investment in our branch network and our mobile lending channel”.
Late last week Macquarie Group also announced it would wind back its mortgage business due to high wholesale lending costs.
Colin Sacks, chief executive of Mortgage Fair mortgage brokers, says the falling number of products and tighter lending conditions could see weaker mortgage broking practices forced to close.
“No question, there has been a fall in the number of products – lots of lenders are a bit unsure if they will have any product at all. For the big banks we mostly deal with, it’s business as usual, but generally we are seeing higher rates, tighter lending conditions and less discounts, and that could result in a couple of mortgage brokers exiting the business,” Sacks says.
And, he says, while broker commissions have yet to be affected, lenders are coming under increasing pressure to recover extra costs.
“At this point it’s business as usual for the mortgage brokers. There is some pressure, but as yet no commissions are coming down.”
Warren O’Rourke, national manager corporate affairs with mortgage broker franchise Mortgage Choice, says he is also seeing mainly non-bank lenders scaling back the range of products they are selling through mortgage brokers.
“Some have pulled back and will only offer a limited range where they can get products to market at a competitive rate and get a profitable return, especially among the non-bank lenders with a higher dependency on wholesale funds,” O’Rourke says.
O’Rourke denies the withdrawal of products is harming mortgage brokers, however, and says Mortgage Choice has not been told by its mortgage originators that commissions on loans will have to be cut.