Mortgage brokers smashed by credit crunch

Australia’s mortgage brokers have been hit hard by the global credit crunch, with commission rates falling dramatically and industry consolidation expected to continue.

A survey of mortgage brokers by research firm Datamonitor conducted in February found that 80% of brokers are now receiving commissions below 0.60%. By comparison, just 27% of brokers were receiving commissions below this level in 2007.

Most brokers expect commission rates to remain at that level or fall further in 2009.

The report’s author, Petter Ingemarsson, says the withdrawal of non-bank lenders from the mortgage market following the credit crisis has reduced competition and given the major banks the power to push down commissions rates.

Back in July 2007, non-bank lenders accounted for 21.2% of mortgages, but this had fallen to 6.8% by December 2008.

“Mortgage brokers and non-bank lenders enjoyed a symbiotic relationship in Australia, and the downfall of non-bank lenders has hit the mortgage broker industry hard,” Ingemarsson says.

He expects consolidation – already seen in Aussie Home Loans’ purchase of Wizard – to continue. Mortgage brokers will also try to survive by diversifying into insurance and other financial services products or specialising in certain niches of the mortgage market.

Related story:

• • Mortgage brokers forced to change or perish as banks squeeze harder