Commission hikes a start, but not enough

by Mackenzie McCarty26 Nov 2012

An industry consultant has said that recent upward commission adjustments from some non-banks will not be enough to keep some brokers being pushed to the wall by low volumes.

Several non-bank lenders have raised their broker commission rates in the past month, in the hopes of persuading brokers away from the major banks.

However, Sak’s Consulting principal Steve Paterson says many brokers are struggling in the current low volume market and that it will take an increase in loan applications, not just a hike in their commissions, to keep them in business - though he acknowledges it's a start.

“My anecdotal understanding is that it’s difficult for brokers to run successful businesses at the current level [of lending volume]. If the current level continues for some time, more brokers will leave the industry – it’s just not as simple as upping commission rates.”

That said, Paterson hopes recent commission increases and temporary bonus offers coming from alternative lenders like Mortgage Ezy and Australian First Mortgage (AFM), are a sign of things to come.

“I speculate that it’s indicative of the market, which I read as being very competitive for new lending transactions.”

AFM’s national head of sales, Clint Hawthorne, agrees that times are tough for many brokers but says the major banks need to step up and do their part.

“I think there are a lot of brokers out there who are finding it hard to make ends meet and it would be great to see brokers getting more reward for the amount of effort they’re putting in. I know Macquarie, Mortgage Ezy and a few others have increased their broker commissions and I think it’s a sign of things to come. It’s great to see alternative lenders leading the charge.”

Paterson says that brokers have to, in their own interest and that of their clients, try and secure the best deal they can in the shortest period of time – and this, he says, is where the big four have the advantage over smaller lenders.

“Just by logic, all things being equal, the four majors probably have the greater resources to do that. If you go to the other end, they might have all the intent in the world, yet they might not have the logistic capacity to deal with so many transactions.”

But Hawthorne says alternative lenders are better at providing individual service to brokers, along with faster processing times.

"We're a very quick and nimble service; we have credit managers that you can actually deal with direct. I think alternative lenders are becoming a force to be reconed with."