Banks Squeeze Out Mortgage Brokers
Sydney Morning Herald
Monday November 25, 2002
The number of mortgage brokers operating in Australia has fallen as lenders reduce the number of brokers through which they distribute loans.
Quarterly survey data gathered by the Market Intelligence Strategy Centre showed an 11per cent reduction in the total number of brokers writing business during the June 2002 quarter.
The broker pool consisted of 556 brokers writing loans in the three-month period, compared to 623 active brokers in the March quarter and 2500 known to occasionally write mortgages.
It is the first time the MISC survey has detected a reduction in active brokers, which the group defines as those who settled three or more loans in a quarter.
Simultaneously, a group of second-tier brokers defined as those who wrote 1000 or more loans increased their share of the market overall and by 15 per cent in the relatively immature market of Queensland.
Brokers wrote 20 per cent more loans in Queensland than the previous month, despite a relatively flat quarter in home lending.
MISC claims the trend reflects that ``banks and other lenders are clearly targeting specialist brokers and reducing the number they seek to deal with".
``This rationalisation process is a feature ... of a maturing industry.
``The brokers are consolidating and merging with other sometimes interstate groups or acquiring consultants who once acted independently to join their groups."
While banks concede that mortgage broking is a distribution network that has achieved critical momentum in Australia, they view brokers as rivals which erode lenders' margins because they are paid a commission when they place the loan.
It is widely accepted among financial services group that brokers are the originators of about 30 per cent of home loans in Australia.
The network benefits the lenders that have no means of distribution, unlike banks which own branches.
Banks have dealt with brokers either by ignoring them or forging relationships with them.
Commonwealth Bank has attempted to catch up to its banking rivals after initially ignoring brokers.
The bank, in its June 30, 2002 financial results, claimed its work to engage brokers had paid off.
CBA loans, the bank said, accounted for 12 per cent of the mortgage broker market in the year to June 30, up from 7 per cent in the previous year.
© 2002 Sydney Morning Herald
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