Borrowing power becomes pivotal in lender choice

However, borrowing power was nominated by 84 per cent of brokers as a factor their customers were seeking from a lender, after rising 17 per cent year on year and 26 per cent since 2021.

Time to improve was cited by 81 per cent of respondents, while bank reputation was selected by 43 per cent, up 3 per cent year on year.

Macquarie said the sharper focus on loan capacity reflected the effect of tighter household budgets and persistent housing affordability pressures.

“With several rate hikes, higher costs of living, and elevated house prices (despite some recent reductions), borrowers are likely constrained by the amount they can borrow, which we believe underpins this consideration,” the report read.

The finding puts serviceability at the centre of lender competition. While an advertised rate remains the starting point for many borrowers, a sharper offer may not translate into a viable transaction if a lender’s assessment model does not support the required loan amount.

That pressure is heightened by APRA’s requirement that authorised deposit-taking institutions assess most residential mortgage borrowers with a minimum serviceability buffer of 3 percentage points above the loan rate.

The setting is intended to test repayment capacity against future rate rises or changes in household income and expenses, but it can limit maximum loan sizes and complicate refinancing.

Policy settings under scrutiny

Macquarie said broker feedback pointed to lenders reviewing policy settings and serviceability treatment to help offset the impact of high assessment hurdles.

The report noted that concerns about retention activity and channel conflict remained, but were increasingly being raised alongside the practical difficulty of refinancing in a high-serviceability environment.

“While brokers continue to highlight banks’ anti-broker behaviour in retention processes and channel conflict, this year, an increasing number of brokers spoke about the difficulties of high serviceability, especially in refinancing, but did highlight some relaxing of credit policies in order to partially offset this,” the report read.

An anonymous broker indicated lenders were looking particularly closely at investor capacity and the operational settings that can influence whether an application proceeds.

“Lenders are finding ways to improve investors’ borrowing capacity to increase investor demand. I think generally slightly more relaxed credit policy, more lenders making common-sense decisions, more one-touch unconditionals,” a broker said.

Pricing contest shifts

Macquarie also recorded sizeable changes in perceived lender competitiveness on pricing and offers.

Australia and New Zealand Banking Group (ANZ) posted the largest improvement, rising 42 per cent year on year in the survey’s most-competitive-lender measure, moving from among the least competitive lenders to the strongest performers.

“ANZ has sharpened pricing, especially on investor and interest-only loans, while also offering cashbacks on refinances,” the survey read.

ME Bank also strengthened its perceived price position, rising 16 points to become the third most competitive lender in the sample. Macquarie said the result “suggested BOQ’s intention to still grow its broker-led digital brand.”

By comparison, the Commonwealth Bank of Australia (CBA), the National Australia Bank (NAB), Bank of Queensland (BOQ), AMP Bank, and Bankwest were viewed as the least competitive lenders on pricing and offers.

[Related: Nearly 50% of broker clients struggling to refinance]