St George announced yesterday that from 1 June 2008 it will change the way mortgage brokers earn their commissions.
In the new structure brokers still have the potential to earn a maximum of 0.70 per cent up front and 0.25 per cent trail, as long as they meet certain criteria.
Brokers failing to meet the bank’s new requirements can expect a minimum commission level of 0.50 per cent up front and 0.15 per cent trail.
Full commissions will be paid to brokers based on conversions from application to settlement, meeting agreed loan book run-off rates, electronically lodged applications and cross selling products during the life of the loan.
In contrast to Westpac’s April announcement, initial reaction to St George’s new commissions structure from the aggregation industry has been positive.
“We’ve been talking to St George for the last few weeks and we see the changes as a pretty good outcome for both parties,” said Jennifer Nielsen, CEO of X Inc.
“The changes they’ve made and the consultation process were well considered [in order] to keep their partners on board,” she said.
But success of the new structure will depend on both parties working “very closely together”.
“The right intent needs to be established for these changes to be effective for both St George and the broker channel – and in discerning how they will measure outcomes,” she said.
Michael Osborne, head of sales and distribution at The Brokerage, agreed with Nielsen’s assessment of St George’s approach to its commissions decision.
“It is encouraging to see that St George have approached the commission issue in a constructive manner, still providing brokers the opportunity to earn full commissions," he said.
George Beatty, acting group executive of retail business with St George said the changes were being introduced after careful consultation with broker partners.
“We intend this to be a clear signal that we will continue to support the mortgage broking industry,” he said.
“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.”