by Jenny Ruth
Bank of New Zealand’s decision to cease dealing with mortgage brokers has created little angst in the market, mainly because its broker-sourced business is so small.
But few think it’s a good decision. Massey University centre for banking studies head David Tripe says the two most successful banks in the mortgage market in recent years have been ASB Bank and National Bank.
"They haven’t done that by ignoring mortgage brokers."
Brokers now account for about 29% of all mortgages written in New Zealand.
BNZ already excluded brokers from access to its Global Plus and Flybuys programs. BNZ Personal financial services general manager Chris Black acknowledges BNZ is at "the lower end" of the broker remuneration scale paying a flat 0.65% of the loan amount in upfront commission in a market where such commissions range from 0.55% to 0.8%. It is also one of the few that don’t pay trail commissions which range from 0.15% to 0.25% a year throughout the life of a loan.
Eyebrows were raised that the bank claims as much as 5% of its mortgages are broker-sourced – while only BNZ knows the figure, most guesstimates would have it less than 1%.
"Five percent in most businesses isn’t significant," Black says, confirming the figure.
He says the decision was the result of a strategic review conducted over three to six months. "Our view is that it’s in the best interests of customers that we deal directly with customers."
Surveys of customers show customers like it that way, Black says.
"It’s convenient for customers to come to us directly. We sit down and talk with them about their whole financial picture in a one-stop sense," he says. This ranges from banking arrangements through to "risk mitigation" or insurance. "Brokers only deal with the mortgage piece primarily."
Black dismisses suggestions that BNZ was finding brokers’ service demands too difficult to meet. "We don’t see it like this. We pride ourselves on the service that we provide, but we like to get close to customers. Business is about standing for something and being clear about what your proposition is and what it’s not."
Mortgage Brokers Association chairman Brian Berry says BNZ had under-serviced brokers. "There hasn’t been a lot of support for the broker channel. They’ve struggled for support from senior management."
Berry says that despite BNZ’s decision, brokers will still need to keep abreast of what the bank is offering to ensure their customers get the best deals available. He doesn’t think this will be difficult without BNZ’s support.
Black says the market share figures show BNZ’s strategy is working: "Our natural market share is 15%. In the December quarter...we wrote 18.6% of all mortgages in New Zealand," he says. Preliminary figures for the March quarter also show BNZ wrote more than its market share, he says.
Tripe says the bank’s market share has remained fairly constant between 15% and 15.5% for several years.
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