Broker channel dominates banks’ mortgage business

The survey, which involved 805 Australians who obtained mortgages within the last six months, excluded refinancing cases and focused solely on property purchases.

The survey highlighted the growing importance the broker channel plays for the Australian banking sector, coinciding with the latest data released by research group Comparator, which showed mortgage brokers facilitated 71.7 per cent of all new residential home loans between July and September 2022.

Among the major banks, Macquarie Bank reported that 97 per cent of its mortgage business originated from brokers, followed by ANZ at 88 per cent.

ANZ’s results for the first half of 2023 indicated that nearly two-thirds of their new mortgages came from the third-party channel, marking an 11-percentage point increase compared to the same period last year.

Similarly, Bank of Queensland revealed that 79 per cent of its mortgage book came from the third-party channel.

The broker channel’s dominance was further evident in the results of other major banks, with the Commonwealth Bank (CBA) seeing 75 per cent of its new mortgages originated from brokers.

This was a significant increase compared to its half-year results where the bank reported the broker channel accounted for around 49 per cent of new mortgages.

Westpac reported that 74 per cent of its mortgage business came through brokers, with the bank reporting in the six months to March 2023, 53.6 per cent of new mortgages were originated by the third-party channel — the highest number it has ever recorded.

Meanwhile, the National Australia Bank (NAB) and Bendigo witnessed 70 per cent and 68 per cent of mortgage business, respectively, originating from the third-party channel.

NAB’s half-year results indicated that 61 per cent of new mortgages originated through the broker channel in the first half of 2023.

New borrowers feel the pinch from rate hikes

While the broker channel’s influence grows, concerns are mounting over affordability, savings buffers, and overall household financial resilience.

New borrowers, who are considered more vulnerable, are displaying reduced capacity to withstand additional interest rate hikes and living costs, as highlighted by the UBS survey.

Only 38 per cent of respondents were more than three months ahead on mortgage payments, down from 51 per cent in August 2022.

Additionally, 29 per cent of survey participants reported that their emergency funds could cover expenses for only up to two months, indicating heightened financial strain.

Overall, the survey suggests that the rising cost of living and the sharp increase in the cash rate are beginning to impact the ability of new borrowers to service their mortgages.

Five out of the seven stress metrics measured in the survey have shown deterioration, with a higher percentage of clients resorting to interest-only loans to alleviate payment stress.

Additionally, fewer borrowers are ahead on their mortgage payments and only 39 per cent are managing their finances with ease.

The survey’s findings align with research conducted by Roy Morgan, which revealed a significant increase of 529,000 Australians at risk of mortgage stress in the past year, coinciding with the Reserve Bank of Australia’s consistent interest rate hikes.

Looking ahead, stress is anticipated to further emerge over the next six months, as the existing cohort of mortgage borrowers has already exhausted the interest rate serviceability buffers established at the beginning of the cycle.

[Related: Mortgage stress hits 15 yr high]