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Following several changes to major bank policies and requirements for self-employed borrowers, mortgage brokers suggest that non-banks are still leading the way in this arena.
Mortgage brokers have largely welcomed recent changes to self-employed borrower policies, particularly the adoption of one-year income assessments, by the big four banks (ANZ, the Commonwealth Bank of Australia [CBA], National Australia Bank [NAB], and Westpac).
The policy adjustments, including Westpac’s recent introduction of a one-year income assessment option, signal a growing intent among the largest financial institutions to better serve the dynamic self-employed sector.
This move follows similar adaptations by ANZ, the CBA, and NAB, as the big four banks increasingly vie for a larger share of this expanding market.
While acknowledging this as a significant step forward, brokers have suggested that non-bank lenders continue to lead the way in offering the flexibility and nuanced understanding often required by self-employed clients.
To truly capture a larger share of this market segment, brokers have said that the big four banks will need to embrace innovation and a more flexible approach to credit policy.
Speaking to The Adviser about the move, Chris Raymond, principal finance broker at Unconditional Finance, believes the shift from a two-year to a one-year income assessment is a long-overdue and impactful change, especially for businesses that have bounced back or grown recently after COVID-19.
He highlighted that many businesses, despite strong performances in the most recent financial year, were previously disadvantaged by weaker historical figures.
“When you’re only looking at the most recent year, it can really open things up and let these borrowers achieve a borrowing capacity that actually matches where they’re at now, rather than being stuck with an average from the past,” he explained.
Despite this positive development, Raymond noted that major banks, including Westpac, still lag behind their non-major and non-bank counterparts in certain policy aspects.
He revealed that Unconditional Finance typically gravitates towards these second-tier lenders for self-employed clients, citing their more current policies and realistic approaches, such as not “doubling up on debts that are already accounted for in the financials.”
For major banks to truly compete, he suggested that the majors should “take some inspiration from the mid-tier lenders”, specifically by “excluding company liabilities that are already expensed in the financials”.
Similarly, Melissa Ashcroft, general manager at AAA Financial Group, underscored the historical disadvantage faced by self-employed borrowers when using traditional banking frameworks.
“It’s ironic that a business owner can employ someone who secures a loan with just an employment contract and a payslip, while the business itself is subject to significantly more scrutiny,” she observed.
The commercial broker lauded the shift to one-year financials as a “step in the right direction”, providing a more relevant “real-time snapshot of the business’s current performance”, noting that it “creates more opportunity for newer businesses that are no longer in their startup phase but have not yet built two full years of financial history”.
“We’re now in a better position to consider [major banks] earlier in the recommendation process than we may have previously,” Ashcroft told The Adviser.
However, she added that many self-employed clients remain “better suited to the non-bank or specialist lending space”, particularly those with complex structures or requiring alternative documentation solutions.
Looking ahead, the commercial broker advocated continued “innovation and flexibility” from major banks.
She proposed simplified income verification methods, such as “accepting 12 months of BAS with an accompanying accountant’s letter as an alternative to full financials”.
Furthermore, she urged a “more nuanced, common-sense approach to credit policy”, recognising that self-employed applicants, despite not always fitting conventional moulds, are often “incredibly financially disciplined”.
These policy adjustments by major banks come at a time when the self-employed sector forms a significant and growing portion of the Australian economy.
Data from the Australian Small Business and Family Enterprise Ombudsman (ASBFEO) indicates that approximately 62.5 per cent of Australian businesses were self-employed as of June 2024. Furthermore, the Australian Bureau of Statistics reported a 5.5 per cent increase in labour income from self-employment to $29.5 billion in the March 2025 quarter, reflecting a trend towards self-employment amid changing economic conditions and work models.
You can find out more about what brokers think about the major banks – and what they think they can improve on – in the July edition of The Adviser magazine, out now!
[Related: What do brokers think of the major banks?]
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