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A swathe of commission hikes in the latter half of 2013 will prompt more lenders to up incentives to brokers as they look to capitalise on a burgeoning broker channel.
Brokers now account for an impressive 46.4 per cent of all mortgages written, according to the Mortgage and Finance Association of Australia, a compelling reason for lenders to increase the focus on their third-party distribution capabilities. The influence of the broker channel has attracted a number of new lenders this year as well as prompting established players to sharpen their commissions.
There are clear signs that there is a robust and competitive lending industry and brokers are the central focal point as low interest rates and rising consumer confidence spark sustained growth in many housing markets.
Speaking with The Adviser, CEO of aggregation group Finsure John Kolenda said he expected banks to continue competing for the attention of brokers and this would include upward momentum in commission rates.
“Certain lenders are becoming more competitive on their commission rates as the market heats up, and I think we’ll see more lenders joining this list in the New Year,” he said.
Macquarie is one lender that has made headlines by upping commissions – most recently with Mortgage Choice. The lender has increased its up-front from 0.65 per cent to 0.7 per cent, while raising third-year trailing commission from 0.15 per cent to 0.175 per cent.
According to the franchise broker, Macquarie is the fifth lender on the Mortgage Choice panel to increase commissions this year.
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Mark Haron, director at Connective agreed that this is just the beginning.
"We will see further commission increases to brokers as lenders compete for more market share," he told The Adviser. "It will be primarily non-majors leveraging commissions but I do expect at least one major to also make a positive move on commissions very soon."
With non-majors leading the charge with commissions, it's only a matter of time for the major banks to follow according to Mr Kolenda.
“The movements won’t just come from smaller lenders trying to remain relevant in the market, and it won’t just be majors trying to solidify their dominance, I think we’ll see an even distribution of lenders across all channels moving on commissions.”
However, director at First Point Troy Phillips told The Adviser that while the lender is very competitive, Macquarie isn’t setting a precedent for the rest of the industry.
“Macquarie are probably the best performing non-major at the moment, along with ME Bank.They have got really competitive offerings.
“But I don’t think we can say we’re seeing a trend; once we start seeing major lenders move commission rates and offering trails from the first year, I think we’ll see everyone follow suit.
“It’s really going to be up to the big banks to set the pace for this,” Mr Phillips said.
