Are we on the cusp of a big four broker crackdown?

by Miklos Bolza21 Feb 2017
A move by the Commonwealth Bank of Australia (CBA) to halt standalone investment refinance applications lending through third parties may spark a shift away from the broker channel by the other major banks, says Martin North of Digital Finance Analytics.
 
Speaking with Australian Broker, North predicted an intention by the big four to refocus on branch lending by moving away from third party channels.
 
“I think the move was quite significant and I think it may possibly lead to others following suit,” he said. “This will particularly be the big guys but probably not the smaller lenders as they don’t have the footprint.”
 
With the digital age resulting in fewer customers visiting bank branches, North said he could see why they were trying to drive extra traffic through the branch network.
 
However, he said that CBA was “batting uphill” even though consumers may be willing to take the slight inconvenience of going to a branch for a big purchase such as a home loan.
 
“There is still a lot of support for brokers by consumers. They believe they get a better experience through brokers than if they speak to the lenders.”
 
The key question, he said, was whether the internal processes within the branches could effectively deliver as positive an outcome as the third party channels.
 
These difficulties would be further compounded with the ongoing move by consumers to the online world.
 
“Digital migration is going to continue to happen. Therefore, is the branch network going to still be around 10 or 15 years down the track? Probably not as much.”
 
While smaller lenders will try to snap up some of the broker market share as the big four step back, there are some obstacles to how many loans the non-majors and non-banks could take, North said.
 
“The first is they have limited capacity to service larger volumes at the moment. If they suddenly have a major demand pick up, that could be a problem with some of the small ones because they just wouldn’t be able to cope with the deluge.
 
“The second is they have their own APRA-imposed speed limits on investment lending so they’d have to be careful about how much growth they actually took on.”
 
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COMMENTS

  • by DC 21/02/2017 8:47:46 AM

    Well I think we can all provide an example of advising a client that their circumstances aren't sufficient to borrow what they are seeking, only to then find out "I went in the branch and they've approved it". Bank branch staff are under pressure with their sales targets, so I guess they will push the envelope. I also remember over the years the number of bank staff held up as examples of "great sales staff" who have ended up being found out as breaking the rules. Oh well, I guess CBA has a $4B half-year profit to play with.

  • by Broker 21/02/2017 11:30:17 AM

    Couldn't care less - there are many other options that actually value the lender / broker relationship.

  • by ed ridge 22/02/2017 9:38:37 AM

    Don't worry they will come back when it suits them and brokers (as a general rule) will go back to them and the master slave relationship will continue until brokers learn to support those that support them.