Mortgage brokers to receive less commissions by lender NAB

MORTGAGE brokers are about to be hit by a cut to their commissions after National Australia Bank announced plans to again put customers first. Here’s what’s changing.

MORTGAGE brokers are about to take a hit as one of the nation’s biggest banks overhauls the way it pays commissions.

National Australia Bank yesterday broke ranks with the other major banks for the second time in as many days, announcing brokers would receive less money when signing up many new customers.

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The move — which came just a day after NAB revealed it was not following Westpac, ANZ and the Commonwealth Bank in lifting variable home loan rates — is believed to have angered brokers.

From November, NAB will use a different way to calculate upfront commissions paid to brokers who sign up new home loan customers.

Each upfront commission will be based on the amount of the loan that is withdrawn at the outset, and not any cash held in an offset account — a transaction account linked to the loan.

Home loan customers often borrow more than they need to buy their properties, then put the extra funds into an offset account to spend later, for example, on renovations.

NAB said that traditionally, banks paid commissions to brokers based on the entire value of each home loan, but that would change under its new policy.

If a customer, for instance, receives a $500,000 loan but only needs $400,000 — and so tips $100,000 into an offset account — the broker will now only receive an upfront commission on $400,000.

The bank is not axing trailing commissions, which are payments it keeps making to brokers long after customers receive their loans.

Mike Felton, chief executive of broker lobby group the Mortgage and Finance Association of Australia, said the changes showed the industry was “absolutely serious about change”.

Mortgage and Finance Association of Australia chief executive officer Mike Felton said the changes are will ensure customers are being signed up to the right loans for them.

“At the end of the day it means the customer gets a loan that is appropriate to their needs,” he said.

“It should be a better outcome going forward — you are not getting a larger-than-necessary loan size and there’s no incentive to provide that.”

Under NAB’s new policy, if the customer withdraws more than $20,000 from the offset balance within the first year, the broker will receive commission on that amount.

Typically, upfront broker commissions are 0.54 per cent and trailing commissions are 0.14 per cent of the remaining loan balance every year.

The changes have been made as a result of recommendations from the Australian Securities and Investments Commission’s Broker Remuneration Review and the Sedgwick Retail Banking Remuneration Review commissioned by the banking industry.

NAB executive general manager of broker partnerships Anthony Waldron said the new policy would help customers.

“Mortgage brokers play an important role in helping Australians arrange their home loans and NAB continues to value and support them,” he said in a statement.