NZMBA chairman Geoff Bawden says it is correct that ANZ National Bank is reviewing the commissions it pays mortgage brokers, particularly in light of the current price war being conducted between the major home lending banks, particularly in two-year fixed rate loans.
Although the first he heard of it was through the media on Monday, he has since received assurances from ANZ National Bank that the NZMBA will be consulted before any changes are implemented.
ANZ National chief operating officer Steven Fyfe has been reported as saying that banks' profit margins on home loans have fallen by about a third during the past four to five years but that broker commissions haven’t fallen at all.
While the NZMBA is a voluntary industry body, it represents about 700 mortgage brokers.
Bawden says the current price war is temporary. Bank of New Zealand, which has made a major advertising splash of the fact that it no longer deals with mortgage brokers, is offering a two-year fixed rate loan at 6.90% until December 17.
BNZ chief economist Tony Alexander has said that his bank’s gross profit margin on that offer is only about 25 basis points.
The other major banks will privately concede that, although they mostly haven’t been advertising the fact, they are prepared to match BNZ’s offer, as well as trying to fudge the issue by offering similar "special" deals for different periods.
But at such thin margins, after all their costs are taken into account, whether or not they use mortgage brokers, the banks are clearly losing money.
"The reality is, they will restore their margins as soon as they’re humanly able to," Bawden says.
At the same time, brokers need to be realistic and to recognise that they should be working very hard to prove that they’re a "value proposition," he says.
Rather than an adversarial relationship with lenders, he is hoping that consultation will result in "win-win" solutions for both lenders and brokers, he says.
