KEY POINTS:
Mortgage brokers face tough times as the dramatic slowdown in house sales and a cut in the commission they earn from banks eat into their incomes.
Mike Pero Mortgages says it processed a third fewer loans last month than it did in November last year.
Mike Kingston, spokesman for Auckland where the Mike Pero franchise handles about 10 per cent of home loans, said it was a sign of the market.
"The difference between the list price and the sale price is opening up. I think you find now that vendors are having to be much more realistic."
The number fits with the latest Real Estate Institute figures, out this week. REINZ says nationwide 7837 homes sold last month, compared with 9990 in the same month last year.
Meanwhile the main banks have slashed the commission they pay brokers for bringing in loan business. ASB was the first to move, and implemented new rates on October 1.
Head of retail banking Ian Park said instead of paying a flat rate of 0.8 per cent of the value of a loan, ASB now paid brokers between 0.5 and 0.7 per cent.
Park said it was a cost-cutting move as the profit margins banks earned on home loans had been shrinking for some time, for reasons including competition in the banking market and the international cost of funds.
"This didn't sneak up on us, we knew this was happening, so we kept talking to them [brokers]."
The National Bank also cut broker commissions from October 1. General manager of business development Mark Patton said it now paid brokers up to 0.7 per cent of the value of a loan, but had different arrangements with various broking firms.
Westpac said it had implemented changes to its broker commission structure last month. It now pays a flat 0.65 per cent, down from 0.75 per cent with the ability to access a 0.1 per cent bonus.
Miranda Caird, chief executive of Roost mortgage brokers, said the cuts in brokerage from banks was taking about a third off the group's income.
But she said although Roost had seen months within the last year where numbers of loans processed were down significantly, year-on-year its loan volumes were flat.
Adam Parore of Adam Parore Mortgages said he was surprised to hear the Mike Pero number, as his group hadn't noticed a drop-off.
Of the cut in commissions, he said mortgage broking was a constantly changing industry and players had to stay dynamic.
He said brokers had once earned "trail" - 0.25 per cent of the value of a loan annually over the lifetime of the loan - and had got used to good incomes. "All our guys are pretty new and pretty fresh. None of our guys had big trail books."
Mortgage Brokers Association chief executive Megan Salt said it was "a very difficult and tough" environment for brokers at the moment.
On top of the commission cut and the downturn in the home-buying market, the sub-prime lending crisis had affected some investors and developers who were finding it difficult to access funds, Salt said.
But homeowners were continuing to favour brokers. Between 37 and 42 per cent of loans were processed through a broker compared with 23 per cent several years ago, she said.
And well-established brokers with good client bases were busy re-fixing mortgages, as terms came up and people looked to restructure to consolidate debt or fund things like home improvements.
"A broker is ... a professional adviser, a manager of the financial needs of their clients. A good broker will manage that relationship well."
SQUEEZED
Mortgage broker commission earned on a $200,000 home loan:
* Was up to $850
* Now could be as low as $500
