Mortgage brokers are being pushed out of the real estate game by more regulation and changes to commission structures.
At its peak, the New Zealand Mortgage Brokers Association had up to 1400 members. Today, as part of the Professional Advisers Association, it has about 500.
In 2007, mortgage brokers were processing 40 per cent of lending. The number of loans through brokers grew substantially from 1991, when only 1 per cent of loans were broker-processed, to 7 per cent in 1996 and 27 per cent in 2001. These days they are responsible for about 20 per cent.
PAA spokesman Ian Webb said by international standards, Kiwis were reluctant to use brokers. In the US, about 90 per cent of home loans were negotiated by brokers.
He said New Zealanders expected to get good advice from their banks but that wasn't always the case. People who took the lowest rate in 2007 - a five-year fixed rate at 9.5 per cent - would now be questioning whether they had got the best interest rate.
"Now, short-term rates are the most attractive because banks don't want people locking in low interest rates. Not enough people are seeking sound advice."
But Webb said tighter regulations on brokers made it an expensive business to be in. His organisation was paying an extra $5000 a year per broker to cover the new costs of Financial Markets Authority regulation. Up to 90 per cent of brokers were now part of a group.
Philip Macalister, publisher of The Mortgage Mag, aimed at brokers, said the New Zealand market was unique as only three banks dealt with brokers: ANZ, ASB and Westpac.
Westpac said using brokers was a way to provide flexibility and choice. ASB, one of the first to work with brokers, said it gave customers more choice.
But Kiwibank and BNZ, which don't work with brokers, said it was better to keep lending in-house.
"We're confident we get a better result for our customers by working with them directly to understand their total banking needs," said BNZ's head of retail delivery and risk, Matt Cullum.
Macalister said brokers' business fortunes were improving as the housing market picked up in most parts of the country.
Fees had changed though. Banks no longer offered trail commissions, which paid out over the term of a loan.
Broker Jeff Royle said the customers' interests were his main consideration when he placed a deal with a bank, because they all offered largely the same commission - between 0.5-0.7 per cent of the loan as an upfront commission.
In almost all deals, the customer did not have to pay for the broker's advice. But Royle said he would charge a fee if the property was going to change hands within 12 months.
If a loan was paid back within a year, the bank clawed back the commission it paid the broker.
John Bolton, of Squirrel, said his business reported 50 per cent year-on-year growth. "We spend a lot of time helping clients get realistic. There is no point chasing properties that will go above their limit. Banks don't do any of this stuff."