Mortgage Brokers In Feud With Banks

Sydney Morning Herald

Monday April 21, 2008

Clancy Yeates

THE mortgage broking model, widely believed to have increased competition between lenders, is under threat from a growing feud between mortgage brokers and banks.

The two sides are locked in discussions about the size of commissions that brokers receive for arranging loans, which Westpac cut by 40 per cent last week.

The Commonwealth Bank, St George and NAB have made clear their intention to reduce brokers' share of the loans business, by announcing reviews into the commissions they pay.

"The combined pressures of the last eight months and our commitment to remain a strong industry partner have led us to review the profitability of the business, in line with our responsibilities to our shareholders," a Commonwealth Bank spokesman said.

The bank's chief executive, Ralph Norris, floated cuts to brokers' commissions in February.

If other banks follow Westpac's lead, the relationship between brokers and banks could deteriorate, causing brokers to avoid the major banks.

As non-bank lenders struggle to compete, such a deterioration could relax the competition between banks that brokers claim to have encouraged.

Mortgage brokers have a hand in more than 40 per cent of new home loans.