The bank says gross margins on mortgages have fallen about 20 basis points since 2002 due to increased competition and a greater reliance on higher-cost wholesale funding but brokerage rates ANZ has paid have remained largely unchanged.
"The broker market is strategically important however it is unlikely the overall margin decline will be reversed," says the bank’s managing director of mortgages, Chris Cooper, to justify the cuts.
"As a result, ANZ has no choice but to make changes to protect its business and to ensure customers using brokers continue to receive competitively priced mortgages," he says.
The bank will cut its trail commissions by five basis points – they are currently between 20 and 30 basis points, depending on broker loan portfolio size.
It is also introducing commission clawback arrangements if loans are repaid within 18 months or substantially reduced within 12 months.
"We are committed to working with our broker partners. We have leading mortgage products and the broker channel has helped grow our market share by serving customers in regions where we are under represented and by attracting customers who are new to ANZ," Cooper says.
"We have re-engineered our business to try and absorb margin decline in recent years. The size of margin reduction however, particularly over the last year, has meant we have no choice but to share some of the effect of lower margins with brokers through lower commissions."
New Zealand Mortgage Brokers Association chairman Geoff Bawden says that if these are the changes ANZ decides to introduce in New Zealand, it won’t be such a big deal.
ANZ’s trail commissions are currently higher than the rest of the market and most of the other lenders have clawback clauses in their contracts, Bawden says.
"That in my view only brings them into line with most of the other players."
But Bawden suspects ANZ plans to go further in New Zealand. "My opinion would be that these aren’t the changes being mooted for New Zealand. I think there are other changes to be made."
In a similar vein to Cooper’s comments, ANZ/National Bank 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.
