His view of the change is that banks are protecting their market position. He says banks are happy for mortgage brokers to have 30% market share of all loans written, but they are uncomfortable with the current levels which are approaching 40%.
He says banks have a lot of cost sunk in their branch networks and need to generate the business directly to cover costs.
Shatford doesn’t believe the banks’ arguments that the moves are being made because of margin squeeze. His research shows that the margin between rates and the swap rate has remained reasonably constant over recent years.
Added to that banks have trimmed trail commissions paid to brokers which, he says, must helps bank margins.
The question is what are brokers going to do? Are they going to stop writing business for banks which cut margins? If they do will they stay away forever or come back later?
His view is that brokers should stop, or reduce the amount of business they write for banks that cut commission levels.
Shatford’s fear is that this won’t last for long and brokers will return to the banks. This happened when banks cut trails.
His view is that banks are predicting brokers will act in a similar way around this time.
However, brokers have plenty of other options, such as non-bank lenders, but they don’t really understand what they offer, Shatford says.
He says if they knew more about the offerings business would move to non-bank lenders and stay there.
“If (brokers) understood they will go to non-bank lenders and stay.”
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