Another mortgage broker switches to fee for service

Mortgage broker Naked Mortgages has changed the structure of its business from a standard commission-based revenue model to a flat-fee service charge, with a rebate of the lender's commission to the customer.

Naked is the second broker to switch to a fee-for-service model this year. Newcastle broker Independent Mortgage Planners made the change in February.

Lenders pay upfront brokerage of around 60 basis points (A$1800 on an average sized $300,000 loan). Trail commissions are around 20 to 25 basis points a year.

Naked Mortgages, which has 20 brokers, will charge $550 for an online application and $1280 for a full-service application. The company's media statement did not say whether it would rebate the trail commission as well as the upfront one.

Independent Mortgage Planners charges $3490 and rebates the upfront and trail commissions.

IMP's managing director, Craig Morgan, said: "We give each customer an analysis of how they come out under our fee structure. If we can't show them how our deal improves their position we call it quits."

Naked Mortgages' chief executive, Matt Graham, said the value proposition for customers was that fee for service removes the commission bias from the broker's advice.