Mortgage brokers in New Zealand are facing a crisis as major lenders consider halving commission.
The New Zealand Mortgage Brokers Association met representatives of the four major NZ banks last week for talks to stave off the threat caused by tightening margins.
Lenders are thought to be preparing to cut commission within six weeks, with suggestions that broker remuneration could be halved. This means brokers will be forced towards fee-charging models.
Banks stopped paying annual trail commission last year, leaving brokers to survive on up-front commission, generally set about 0.8 per cent of the value of a loan.
In contrast, Moneyfacts’ research last month showed that commission in the UK has been growing steadily in the prime market over the past few years, despite many lenders complaining of tightening margins.
NZMBA chairman Geoff Bawden has been reported as saying: “In some respects, charging a fee in the marketplace would be the ultimate acceptance of the value brokers add but I do not think this market is in a position to accept that.”