ANZ may reduce brokers' loan cut

ANZ National Bank, the country's biggest bank with more than one-third of the residential mortgage market, is considering cutting the commissions it pays mortgage brokers for bringing it home loan customers.

ANZ National's chief operating officer, Steven Fyfe, says banks' margins on home loans have fallen by about one-third during the past four to five years. However, there has been no fall in brokers' commissions.

"There has to be a correlation. Brokers are expecting it," says Fyfe.

He says the bank is talking to brokers about reducing commissions in line with margins.

Fyfe's comments come during a price war in the two-year fixed home loan market.

BNZ launched an "unbeatable" campaign on October 11 and says it has lower costs than rivals because it stopped using mortgage brokers and paying their commissions in May 2003.

Broker costs can be nearly 1 per cent of total loan values.

But Fyfe says ANZ National has no intention of stopping using brokers.

Mortgage Brokers Association chairman Geoff Bawden says brokers are aware the margins on home loans are probably the finest they have ever been.

The two-year swap rate, which represents banks' marginal cost of funds, was at 6.51 per cent yesterday.

That's just 0.39 per cent below the 6.9 per cent interest per annum BNZ charges customers and 0.44 per cent below ANZ and ASB's 6.95 per cent rate.

"Naturally that puts all channels of delivery under the microscope and we would be foolish not to understand mortgage brokers were one of those channels," says Bawden.

However, he says the association has not held discussions with individual banks on commission reductions and he hopes these will occur rather than the banks "arbitrarily" imposing cuts.

Ross McEwan, ASB Bank's head of retail banking and marketing, says ASB has no plans to change its commission structure but is watching developments.

"The market may well move towards paying brokers less, but ASB will not lead that movement."

Westpac spokesman Paul Gregory says the bank is looking to change the way it pays brokers. He says the changes will make it more lucrative for brokers to bring customers to Westpac for longer periods of time.

The aim is to reduce churn, that is when a broker's client is shifted from one bank to another.

According to David Tripe, Massey University's senior lecturer in banking studies, ANZ National Bank had a 35.5 per cent share of residential mortgage lending at June 30. ASB had 22.5 per cent, Westpac 20.4 per cent and BNZ 15.9 per cent.