An ongoing lender price war is putting pressure on bank margins, with the risk banks could see broker commissions as a cost that could be further cut, according to Advantedge's Steve Weston.
Speaking at PLAN Australia's national conference in Darwin last week, Advantedge general manager of broker platforms Steve Weston said mortgage pricing is the most competitive he has seen in his 25 years in the industry.
However, he said that Advantedge continues to warn banks against further cuts to broker commission levels.
"In the discussions that we have with all of the banks regularly, we do make the point that we are not encouraging this price war," Weston said.
"It is great for consumers, and we understand that lenders need to make an adequate return for their shareholders, but we ask them please don't look at broker commissions.
"We have seen that once, and we can't afford to sustain any more hits. We would much prefer a more rational pricing environment, and to get on with business," he said.
Weston said he can understand why the price war has arisen, given a market that is seeing historically low credit growth and house price stagnation.
"What I am not too sure about is where it is going to end. Because at the end of the day, shareholders are going to demand a return."
Weston said lenders derive income from credit growth, net interest margin and fees. However, fees have come under pressure due to measures such as the exit fee ban, and credit growth is likely to stay very low.
Weston said this is likely to result in a focus on net interest margin and costs. "Certainly across the industry we are going to see a much greater focus on costs, but we don't want to see that at the expense of commissions."