Perth-based customer owned bank P&N has sweetened upfront payments to mortgage brokers and reined in trail commissions under a revamped remuneration model that takes effect this month.
P&N Bank, which boasts a A$6.2 billion home loan book, has also announced a revised clawback system that allows the bank to retrieve upfront commissions if borrowers refinance mortgages within two years.
Under the changes, P&N has replaced its tiered structure for upfront commissions with a flat rate commission of 0.715 per cent of the loan value originated by the broker.
This means that brokers are line to receive upfront commission of around $2145 if they introduce a client to a $300,000 home loan provided by P&N.
By moving to the flat rate commission, the bank is juicing up incentives for brokers originating mortgages with higher loan to value ratios.
Under the previous arrangements, P&N’s upfront commission for mortgages with loan-to-value ratios of up to 95 per cent was 0.55 per cent and the bank paid no commission on higher LVR mortgages.
P&N confirmed that the new flat rate commission would be paid on broker-originated loans with LVRs above 95 per cent.
The bank has rejigged its trail commission model to boost the additional commission that brokers receive 12 months after a loan is originated.
The first year trail commission rises from 0.11 per cent to 0.165 per cent.
However, P&N has slashed trail commissions it will pay if a borrower doesn’t refinance after four and five years.
The trail payment payable to brokers in the fourth and fifth year of a mortgage falls from 0.22 per cent to 0.165 per cent.
The bank has rejigged its clawback conditions, but will continue to reclaim all or part of the upfront commission for up to two years if a borrower takes their mortgage to another lender.
P&N will retrieve the entire upfront commission from a broker if a refinancing occurs within 12 months.
If the refinancing occurs after 13 months it will reclaim 50 per cent of the upfront commission.
If the borrower refinances in the 24th month of the loan contract, P&N reserves the right to retrieve 6 per cent of the upfront commission.
P&N’s decision not to reduce the clawback period to under two years is slightly controversial given that other lenders have recently moved 18-month clawback caps.
Westpac announced in July that it would no longer seek to reclaim upfront commissions after 18 months.