Brokers and low doc loans a path to low bank profits

A research paper prepared by investment bank JP Morgan and consultants Fijitsu Australia argued that home loan providers lose money on 4 out of every 10 mortgages, with less than one third of mortgages earning a profit for banks. The report says that mortgage brokers now account for 45 per cent of new loans, but says this sales channel is not all that profitable for banks. The report also says that “almost all” low documentation loans (in which the borrower self certifies their own capacity to pay) are not making money. Fujitsu says that banks must cap the number of broker-originated loans home loans, as Bank of Queensland has done.