Article Archive

Brokers bank on better business by Ben Brennan - Central Western Daily

BANKS’ predatory lending practices are continuing to drive competition out of the marketplace with plans to slash commissions to finance brokers.
The Finance Brokers’ Association of Australia (FBAA) will hold an-Australia first meeting of regional brokers in Orange next week.

It will discuss how the industry can survive as banks maximise their income by slashing broker commissions by more than third in some cases.

Orange broker Gordon Eggins from City Pacific Finance says brokers are doing it tough already in an unstable housing market.

“We’re a small independent business with the same costs and overheads of other businesses,” Mr Eggins said.

“I wish we could absorb a 30 per cent cut in commissions.”

Mr Eggins said he believed other brokers in town would also be under pressure with the sector entirely reliant on income from commissions.

According to the association, mortgage brokers take home between $27,000 and $50,000 on average each year.

The association expects a 33 per cent attrition rate in the sector over the next 12 months, which would mean as many as 30 brokers disappearing from the Central West.

This will hurt home buyers’ ability to find competitive loans.

FBAA national president Peter White said: “The banks have a predatory stance in the market with the costs of loans.

“They have increased their rates over the RBA’s rate ... now they are cutting commissions to brokers by 35 per cent to 40 per cent in some cases.

“Brokers are part of the sales force and the banks are biting off the hand that feeds.”

Mr White and Mr Eggins said brokers played an important role in stimulating competition in the lending market.

“Brokers help diversification, they encourage competition ... these are the purposes of the broker,” Mr White said.

Brokers do not charge clients but rely on commissions from lenders.

Mr White says charging clients may be one of the ways brokers can stay in business.

He said there was little hope banks would reconsider their approach to brokers.

The Orange Round Table meeting will be held at the Ophir Tavern, next Wednesday, September 10. Brokers should call 1300 130 514 to book.

Reprinted from the Central Western Daily, 7th September 2008.