With all of the major banks and most smaller lenders announcing interest rate reductions in the past week – not to mention additional efforts on the part of NAB, CBA and Westpac to up their mortgage market share – a number of readers have begun to questions whether there’s a chance of broker trails enjoying a bit of a boost in the near future.
Aussie Home Loans CEO, Ian Corfield, says it’s a definite possibility – but brokers shouldn’t get too excited just yet.
“Funding costs have fallen, although it will take time for this to fully flow through into banks’ cost of funds as funding built-up in recent years rolls off. I'd love trail commissions to go up, but that would need to be on a sustainable basis.”
Corfield says this means there needs to be a margin to be shared over the lifetime of the loan – not just immediately.
However, he believes brokers will benefit from lower bank funding costs in other ways in the short-term, particularly when it comes to lower interest rates and added discounts for clients.
“Customers are getting the benefit of the current reductions via some great fixed rates - Aussie has just launched a two-year fixed at 4.64%, for example.”
As for exactly when brokers can expect to see lower funding costs manifest into higher commissions, Corfield’s answer is simple:
“When it’s sustainable.”