Macquarie push shows brokers the extra money

Macquarie Group is ramping up its aggressive push into home lending, joining the rush of banks increasing commissions for mortgage brokers.

In a sign of growing competition in the $1.2 trillion mortgage market, Macquarie has raised upfront and trailing commissions for one of the country's biggest brokers, Mortgage Choice. It is the sixth lender to sweeten incentives for brokers in recent months.

Amid rapid growth in Macquarie's $10 billion residential mortgage book over the past year, brokers say the bank has been bulking up on staff so it can handle higher volumes of loan processing.

Under the latest changes, announced to Mortgage Choice brokers this week, Macquarie's upfront commissions were increased from 0.65 per cent to 0.70 per cent, while it raised trailing commissions payable in the third year of the loan from 0.15 per cent to 0.175 per cent.

The trailing commissions are at the upper end of those paid by banks, industry sources say.

With a resurgent housing market driving increased demand for home loans, banks are jostling to expand their share, in anticipation of stronger credit growth.

Westpac, St George, CommBank's BankWest, AMP and the Rock Building Society have raised commissions for brokers since July.

Macquarie would not comment, but chief executive Nicholas Moore has previously played down the bank's mortgage expansion by pointing out its market share is less than 1 per cent.

Growing use of mortgage brokers was confirmed in recent figures from the Mortgage and Finance Association of Australia, which showed the share of new home loans arranged through brokers rose to 46 per cent in the September quarter, up from 40 per cent 18 months ago.

Association chief executive Phil Naylor said banks were changing their commissions for competitive reasons but denied bigger payments could distort the decisions brokers made.

"I think the changes in commissions are really at the margins," he said. "The broker just wants to make their client happy."

The increased competition comes as regulators urge the sector not to ease credit standards; but brokers insist there has been no relaxation in lending criteria.

Mortgage Choice chief executive Michael Russell pointed out several major banks had increased the buffer for testing how borrowers would cope if interest rates rose.

"That's an indication that there's certainly not a relaxation in credit standards," he said.

Despite recent rises in commissions, they are still lower than before the global financial crisis.

Home loans make up a small part of Macquarie's overall business but it has been expanding quickly after it teamed up with Mark Bouris-backed broker Yellow Brick Road last year.

So far this calendar year, the size of its mortgage book has swelled by 77 per cent to $10 billion.