Mortgage brokers have started campaigning to save their industry, but they’re in a tricky position.
Macquarie Bank has stepped up to defend the role of mortgage brokers.
Isn’t that nice of them?
Obviously they don’t have any ulterior motives. They just felt an affinity for those plucky little underdogs, being a plucky little underdog themselves.
The Age gave us an insight into how a recent conference call went:
Macquarie Group chief executive Shemara Wikramanayake has backed mortgage brokers' claim that they are important for competition in the home lending market but says how they get paid may need to change.
As Macquarie reaffirmed its guidance for a record profit, Ms Wikramanayake said it was “important” that brokers continue to operate, given their role in distributing loans for smaller competitors to the big four, such as Macquarie.
The royal commission last week recommended scrapping brokers' commissions, which are paid by banks, and replacing them with an upfront fee. Brokers have vowed to fight the proposed change, which has also divided the banks.
Macquarie has about 2 per cent of the $1.6 trillion mortgage market. Ms Wikramanayake said the bank used brokers “principally” for selling loans, and 57 per cent of the market also used the service of brokers. While there may be changes in how brokers were paid, she said it was important the industry continued to operate.
“So today mortgage brokers do provide a valuable service, we presume, to customers just by the fact that they are predominantly used by the customers,” Ms Wikramanayake said.
“We think they do provide competition and they do provide a service and it’s important that [we] try to continue [this].
I love that little ‘presume’ tucked in their. “Mortgage Brokers provide a valuable service. I mean, we presume they do, because we have no idea what their value proposition to customers actually is, but people keep using them. LOL.”
But what Macquarie does know is their value proposition to Macquarie bank. To MacBank, brokers are front line sales staff.
Try walking into Macquarie Bank in Sydney and asking about a Mortgage. No chance. In fact, unless you enter via the heli-pad, I don’t think they even let you into the building.
But Macquarie has no branch network. It has no branch managers and lending specialists in non-threatening chairs. They rely on mortgage brokers to sell their products.
And this is where it gets tricky for mortgage brokers. Really they should be hitting up banks like Macquarie who have no alternative distribution channels, and getting them to go into bat for them. Get them to stump up for the costs of an advertising blitz.
But that just then proves the point that consumer groups are trying to make. They argue that banks have just outsourced their front of house services to mortgage brokers, and mortgage brokers are simply the retail to the banks’ wholesale.
That is, they are working for the banks. They are paid by the banks. They are working for the banks.
And not, unfortunately, the customers.
Getting banks who desperately need your service to pay for your political campaign just reinforces this impression.
Sadly, mortgage brokers really need a grass-roots campaign. They need consumers to come out lobbying for their brokers.
But how many people have any connection to a mortgage broker? I churn through a lot of properties, so I have a broker on speed dial. But for most people it’s just a one-off service you use every 15 years or so.
I find it hard seeing people taking to the streets about it.
Mortgage brokers do provide a valuable service, and I really think the industry needs them. The market will be much worse off without them.
But they’ve got to find a way to distance themselves from the banks. They need to find a way to clearly demonstrate their value to the public – even if that means educating a bunch of people who have no idea how the market actually works.
It’s going to be tempting to get the big money guys like Macquarie to go in and bat for them, but I really don’t think it helps their cause.