Weeks of work goes into scripting the opening statement that Commonwealth Bank chief executive Matt Comyn gives to the bank’s investor briefings.
“Cash-backs are growing in size and prevalence, and we estimate that banks have deferred costs relating to cash-backs of over $1 billion. This figure has increased almost 50 per cent in the past two years, and combined with a substantial increase in commissions over the same period, creates a margin headwind that will flow unevenly across the market.
The fact that about 70 per cent of home loans are written through brokers means their commissions are growing, too; a broker typically gets an upfront commission equal to 0.6 per cent of the loan amount, plus an annual trailing commission of 0.17 per cent of the loan value.
That will mean their margins on deposits start coming down at a time when mortgage margins are already being smashed. Macquarie insiders insist its approach to the mortgage market hasn’t really changed in the decade it’s been building the scale of its business. Its pricing is competitive with the broader industry, but its success has largely been built on service levels and the speed with which it can turn a loan around for brokers and their customers. It doesn’t do rate discounts, and it never does cash-backs.