Commission Cuts to continue for Brokers in 2009 (Sunday Tribune) [PIBA Mentioned]
Brokers are furious at the decision by mortgage lenders to continue giving them drastically reduced commission for the forseeable future. Most lenders plan to continue their move away from the typical 1% commission and keep or freeze rates at between 0.5% and 0.8% in 2009. This does not reflect the value of the service and the big savings on in-branch mortgage administration costs that mortgage brokers provide to lenders, according to the Professional Insurance Brokers Association (PIBA).
"We would estimate the in-branch cost of mortgage administration to be roughly 2% [of the cost of the mortgage loan], and I've no reason to believe it's become any cheaper, " says PIBA Chief Executive Diarmuid Kelly. " That should be the basis of commission for Brokers." The slicing of commission began late last year when Ulster Bank halved its offering for 1% to 0.5%. Other lenders swifly followed suit as the property market declined.
"When the call for commission was mooted it was on the basis that the banks' margins were extremely tight," Kelly said. "If you look at rises in mortgage interest rates, lenders have certainly fattened the calf. Tracker mortgage interest rates, for instance, are now up to 1.5% above the ECB rate...when things return to normal I would expect to see a reversal in these steps. Don't think we will forget this."