Mortgage Brokers earnt more than $1.1 billion in new commissions in the last year, as their share of new loans continues to rise according to the latest results from the Digital Finance Analytics Mortgage Industry Model.
The model tracks new loan approvals and channel mix and estimates the commissions earned by brokers from lenders.
The share of loans originated via brokers has reach 50% across the market (some say it is even higher, as much as 60%!)
APRA publishes ADI specific data showing that foreign subsidiary banks originate close to 70% of their loans via brokers, other domestic banks, around half, just above the average of the big four, with credit unions and building societies lower.
Brokers can earn an upfront commission on each new loan, as well as a trail. According to a recent MFAA document:
Lenders usually pay upfront and/or trail commissions in respect of the loans, mortgage brokers originate. The upfront remuneration offered by lenders is mostly uniform at 0.65%, and trail remuneration also uniform at 0.15% for the life of the loan. Lenders vary in their application of claw-back, ranging from 12-24 month terms as well as their introduction of trail payments (delayed until the 13mth).
The MFAA would like to note that broker remuneration provided by lenders has reduced over the past ten (10) years from a mostly uniform offering of 0.70% and 0.25% for upfront and trail commissions
There are however some variations between lenders in the absolute percentage applied, reflecting commission tiers, targets and other factors. It is hard to get solid industry data because commission arrangements are bi-lateral commercial agreements, and often not fully disclosed.
However, using data from a range of sources, taking into account commission rates and new loan volumes, we have an estimate of the monthly flow in new commissions earned. Commissions have been rising in line with loan growth (as it directly related to the size of the loan) as well as rising third party origination. Some lenders have tweaked commission structures recently to incentivise specific types of loans.
So, we estimate over the past year, $1.1 billion of new commissions were paid to brokers. A relevant statistic given the current broker remuneration review by ASIC.
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