Australian Broker magazine Issue 8.20

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ISSUE 8.20 October 2011

Banks put broker share in the balance

Martin North

 Broker market share future to depend on bank desire for client ownership

Mortgage broker market share has increased, but whether it continues to rise will largely depend on the strategies employed by major banks, a leading mortgage industry analyst has said. The recently released JPMorgan/Fujitsu Australian Mortgage Industry report indicated that broker share of the loan origination market rose 2% to

43% over the previous six-month period. Fujitsu executive director Martin North said the continued recovery in the channel’s share of the home loan market to near preGFC levels showed its proposition remained strong. “Certainly a couple of years ago there was quite a bit of speculation over what the role of brokers would be and what share of the market they would have going forward. The trend continues to be that brokers have a very significant share of the marketplace,” North said. However, the rise in market share – which comes after North previously predicted the channel

Date with disclosure

may have stabilised at a level of 41% – comes alongside a decline in broker profitability. The report confirmed that broker commissions were at around two-thirds of pre-GFC levels, and reiterated previous predictions that market power has slipped from brokers towards the major banks. Where this market power leads will largely be dependent upon bank strategy, with North saying the banks may seek to prioritise ownership of the client relationship via direct lending. “The issue is, if they originate loans through the third party channel they may not have the same relationship connection with the customer, and that may in the long-term have some implications because many brokers are beginning to build their own customer relationship management systems and are trying to understand consumers to have a better relationship with them,” he said. JPMorgan banking analyst Scott Manning agreed, pointing to Westpac as an example of a lender focused on ownership over its client relationships. “Westpac has pulled back substantially in terms of broker usage, primarily through their St.George brand post-acquisition. One of the reasons is, it’s simply not a case of throwing your balance sheet at whoever wants a loan, but they are specifically focused on products per customer and increasing customer profitability.” Page 18 cont.

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Brokers navigate new NCCP disclosure requirements Page 2

Not a ‘piss up’ FBAA promises a more robust industry conference Page 6

Low-docs, not lie-docs Low-docs still viable under new legal responsibilities Page 8

Inside this issue Analysis 20 Channel conflict and commission Viewpoint 22 Engaging with consumers The Futurosophist 22 Australia turns Japanese Insight 24 Become your own Facebook fan Market talk 26 The stamp duty conundrum Toolkit 27 Fighting against fraud Caught on camera 28 Choosing freedom with Liberty


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Australian Broker magazine Issue 8.20 by Key Media - Issuu