St George To Cut Its Commissions In Bid For Loyalty

Sydney Morning Herald

Thursday May 1, 2008

Clancy Yeates

ST GEORGE BANK will cut its commissions to mortgage brokers who do not promote the bank's products over a loan's lifetime, the lender announced yesterday.

From next month, the bank will offer up-front commissions of between 0.5 per cent and 0.7 per cent of total loan values, and trail commissions, paid over the life of the loan, of between 0.15 per cent and 0.25 per cent.

To receive the higher rates, brokers will have to promote other St George products, refer low-credit risk customers and lodge applications electronically. The bank had previously paid all brokers the top range of commissions.

The bank, which sources 46 per cent of its mortgages through brokers, said the commissions changes were intended to address the high funding costs of the global credit crunch. "We are keen to reward brokers for value, efficiency and loyalty and we want to build partnerships with those brokers who are serious about working with us," said the acting group executive of retail business, George Beatty.

Westpac recently slashed all of its broker commissions to the minimum levels announced by St George, igniting a hostile response from brokers.

Banks have been locked in discussions with brokers, who have lobbied to keep their commissions intact.

The founder and managing director of Aussie Home Loans, John Symond, supported St George's announcement. "They've obviously put a lot more thought into it, to give you the opportunity to claw back some of the cuts," Mr Symond said. "I think it certainly makes more sense than what Westpac did."

Mortgage brokers sign about 40 per cent of new home loans, but some say the loyalty arrangements with banks distort their ability to seek the best deal for their clients.