Brokers unhappy with National Bank

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National Bank's decision to stop paying mortgage brokers trail commissions from June is likely to be counterproductive, says New Zealand Mortgage Brokers Association chairman Geoff Bawden.

Friday, April 15th 2005, 5:19AM

by Jenny Ruth

The bank's reason for cutting trails is the effects of reduced interest margins on fixed interest rate loans. Bawden says cutting trail commissions doesn't address this problem and could potentially have the opposite effect because it will encourage churn.

Discouraging churn was the reason National's parent, ANZ Bank was the first to introduce trail commissions.

"It's almost like saying (to the broker), we don't want you in this relationship long term, go away. That's not in the long-term interest of the customer and personally, I don't think it's in the long-term interest of any bank," he says.

The reason brokers have gained so much of the market is because they have filled a gap in terms of providing customers with a personal relationship that they can't get in the banking environment, he says.

The NZMBA thinks a more sensible approach to improving profitability would be for all interested parties to work more closely together to find ways to streamline and cut the processing costs associated with broker origination and to increase the industry's skills.

"We know that only about half the submissions made reach loan settlement and the cost savings that could be achieved by working together to improve productivity would be substantial," the NZMBA says.

It is also disappointed that it hasn't been included in the consultation process. National Bank spokesman Robert Reid says his bank will be briefing the NZMBA on the consultation process after it has been completed and the contractual parties have been fully informed.

"We believe that this is the correct process to follow," he says.

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