Westpac isn’t changing the upfront commissions it pays but is tightening up its clawback provisions for loans that don’t stay on its books long and it is reducing trail commissions for the first five years of a loan but increasing them for longer-lived loans.
New Zealand Mortgage Brokers Association chairman Geoff Bawden says Westpac’s moves came as no surprise.
"The association’s been aware for some time that lenders have been reviewing things and looking at their commissions.
That’s one of the reasons we’ve been driving home to our members the message about quality, compliance and sustainability," Bawden says.
While Westpac’s moves could be construed partly as a way of discouraging churn, Bawden says the association has never seen any evidence that loans sourced through brokers tend to churn more often than loans from other sources.
"There’s no evidence that tells us that loans introduced by brokers stay on our books any less time than loans from our traditional channels," Westpac general manager of consumer banking Ken Hodgson says.
One of Westpac’s changes that Bawden takes issue with is the move to pay upfront commissions on the 20th of the month following settlement.
"That creates quite a period for the broker to manage cashflow," Bawden says.
While most businesses operate on settling accounts on the 20th of each month, the norm in mortgage broking has been immediate settlement after the loan has been drawn down, he says.
Nevertheless, Bawden says Westpac has been careful about consulting with the major groups and has worked hard at avoiding being seen as "anti-broker."
