KEY POINTS:
Mortgage broker Mike Pero may offer house buyers its own loans in response to moves by major banks to slash the commission they pay brokers.
Its 50 per cent owner, New Zealand Finance Holdings, said yesterday Mike Pero would roll out "a broader financial services products range" shortly.
NZ Finance chairman Richard Waddel indicated Mike Pero-branded mortgages were under consideration. "It's certainly been discussed but it hasn't yet been decided."
At present, Mike Pero operates as a standard mortgage broker sourcing finance for home loans from trading banks and other lenders and receiving fees, brokerage and trailing commissions.
However, the broking industry is under pressure from the major banks who continue to fund most home loans.
ANZ/National said earlier this month it was conducting "consultation" over plans to effectively halve the upfront commission it paid mortgage brokers. The bank also wants to impose a fee for loans that are approved but not drawn down and to extend clawback provisions on brokerage for loans that disappear from its books from 12 to 18 months.
The move follows a meeting last month where major bank representatives told the New Zealand Mortgage Brokers Association that commissions were under review.
NZ Finance managing director John Callaghan believes the major banks' move away from using brokers, who between them handled about 40 per cent of the home loans written last year, presents opportunities for non-bank lenders.
NZ Finance and Mike Pero co-owner Liberty Financial have substantial mortgage securitisation businesses which involve the packaging up of a large number of loans into a vehicle, protected by mortgage insurance, that can be sold in units to institutional investors.
Callaghan said that outside of the banks, Mike Pero was the largest and most recognised mortgage distribution brand in the country. It was now being positioned by its new owners "to be one of the most powerful brands in the country".
He said the roll-out of new financial services was part of that strategy.
Association chief executive Megan Salt said mortgage brokers offering their own branded home loans was an increasing possibility and a logical response to the banks' proposals.
"I think some sea changes are happening in the industry," she said.
"This is the signal for the broker fraternity, which has a large market share, that it's time for a really good strategic rethink of the model."
She acknowledged there were potential conflict of interest issues for brokers offering their own home loan products, but those could be managed.
NZ Finance acquired 75 per cent of Mike Pero in 2005 and 2006 and its subsequent sell-down of the stake into a joint venture with Liberty Financial, contributed to a 77 per cent leap in net profit to $6.73 million for the year to March.
Callaghan said NZ Finance booked a $3.4 million profit on the sell-down of the Mike Pero shareholding.
Over the March year, NZ Finance, which specialises in first mortgages on residential property, increased its loan book to $96 million from $70 million and increased its home loan book to $76 million from $26 million.
Despite a "turbulent" year for the industry which saw three small rivals go out of business and investors shun some finance companies' debenture stock, NZ Finance's deposits rose 29 per cent to $80 million.
Callaghan said the company was continuing to invest in people and technology "to ensure that we are ready to take advantage of the opportunities that we see in the market place". Earlier this month, when NZ Finance acquired Finance Direct, Callaghan tipped further consolidation in the sector.
Pero plan
* Mike Pero Mortgages is considering offering its own home loans.
* Those loans would likely be provided by owners New Zealand Finance and Liberty Financial.
* The mortgage broking industry is under pressure from the major banks which want to slash brokers' commissions.
* NZ Finance believes that will see many mortgage brokers increasingly recommending loans from non-bank lenders
