by Jenny Ruth
"There are always discussions going on about commission structures and there will be more of that going forward as we try and reinforce the sustainability of the industry," Berry says.
In particular, he points to the way the mortgage market has developed here to the point that borrowers no longer pay application fees and that bank’s commonly make a contribution towards borrowers’ legal and other costs.
"The whole profitability of the mortgage industry is on the back foot from the start. I just wonder if the quest for market share has been so strong that they’ve been prepared to give away everything."
That’s one problem the Australian banks don’t have on their home turf – application fees for loans commonly range from A$300 to A$600.
As far as brokers’ commissions go, "the model we have at the moment needs refining," Berry says. He suggests that because the secret of a loan book’s profitability is its longevity the emphasis is likely to move away from upfront commissions to trail commissions.
In Australia St George Bank last week signalled it will be introducing changes to its commission structure. Westpac, Commonwealth Bank and RAMS Home Loans have also flagged changes.
St George’s group executive of personal banking Andrew Thorburn told The Australian Financial Review that his bank has already written to brokers advising them of a new provision allowing the bank to claw back commissions if the customer does not draw down the full value borrowed.
The bank is also considering paying broker commissions which reflect the profitability of the loan product.
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