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Banks planning to build out their proprietary channels could struggle to reclaim mortgage market share, the broking industry has warned.
The leaders of broker associations, brokerages, and aggregators have defended the broking channel, highlighting a host of benefits they bring borrowers that should help protect against banks seeking to regain ground in the home lending space.
The comments come amid ongoing concerns that banks may be prioritising proprietary channels over the third-party channel. In a new report titled Australian Banks Want Borrowers Back – And Mortgage Brokers Out Of The Way, S&P Global Ratings described how banks are investing in their proprietary channels to win back home loan customers from brokers and boost profits.
Some majors have already signalled a shift away from broker-originated lending to drive stronger returns, with National Australia Bank (NAB) describing proprietary lending as one of its “key priorities” amid a 25 per cent year-on-year jump in new proprietary home loans, while Commonwealth Bank of Australia’s (CBA) latest financial results showed that 68 per cent of new mortgages came from proprietary channels.
Responding to claims that banks could gain market share, Mortgage and Finance Association of Australia (MFAA) CEO Anja Pannek pointed to record-high broker use.
In comments to The Adviser, Pannek said: “The S&P report revisits a long-standing narrative around bank profitability and distribution strategy. Major lenders are indeed digitising elements of the mortgage process, but this is happening in parallel with the closure of physical branches, and at a time when broker market share continues to grow.”
Broker market share has increased almost 25 percentage points over the past five years, with brokers writing a record 76.8 per cent of all new home loans in the March quarter, according to MFAA figures.
“Whether it’s first home buyers, refinancers or borrowers with complex financial needs, Australians continue to choose mortgage brokers in record numbers,” Pannek said.
“It’s not surprising: brokers offer personalised service, lender choice, and are bound by the Best Interest Duty – protections that go well beyond what is required in direct channels.”
Pannek said that brokers save borrowers money, highlighting recent MFAA-commissioned research that found that brokers achieved an average 0.35 per cent reduction in interest rates when repricing and refinancing clients.
She said: “We support a market where borrowers can choose the channel that works for them. And we’re seeing clearly which channel they prefer.”
Speaking to The Adviser, Peter White, managing director of the Finance Brokers Association of Australia (FBAA), said that brokers have reason to be concerned about banks targeting mortgage growth, but emphasised that the broker business model remains resilient.
“Over the last couple of years, we’ve seen some banks start to focus on proprietary channels and some have said as much. I do believe this is partly posturing to keep favour with their shareholders as some may suggest, but the big banks have given us no reason to trust them,” White said.
“Let’s be honest; the banks would love to return to the days where there was far less competition, but the world has moved on and Australian consumers will never stand for that.”
Brokers benefit borrowers
White said that brokers’ unprecedented market share demonstrates their ability to deliver better results for borrowers.
“Consumers are electing to use brokers for their home loans and other loans. They are not compelled to use a broker, but they clearly believe a broker will give them the best outcome,” White said.
“This is the free market at its best and it drives competition and lower prices.”
Speaking to The Adviser about the benefits brokers provide, Mortgage Choice CEO Anthony Waldron said: “Brokers play a critical role in offering choice of lender and helping consumers navigate the complexity in the home loan process. The personalised support brokers provide to customers – in particular those with complex lending needs – can’t be matched.
“Brokers are critical to providing choice to consumers, especially those based in regional areas where bank branches continue to close. Brokers can also provide consumers with access to smaller or more niche lenders.”
Sebastian Watkins, co-founder at Lendi Group (the parent company of the Aussie and Lendi brokerage brands), said: “Brokers offer more than just choice and competition; they build long-term relationships that support customers across a number of different life stages, properties and lenders.
“Crucially, brokers are bound by Best Interest Duty – lenders aren’t – which deepens trust and legally binds us to the customer’s best interest. And while price matters, brokers often navigate lender policies across a range of banks and lenders to find niche solutions, which can often support the customer into their dream home where their main bank said no.”
Tech ‘isn’t the silver bullet’ for banks
The same S&P report found that a new generation of tech-savvy borrowers is embracing digital options for potential property purchases, with digital lending offering banks a key opportunity to erode mortgage brokers’ dominance.
Reflecting on the research, David McQueen, CEO of brokerage Loan Market, said he believed brokers would continue to benefit from consumer preferences for in-person advice when buying homes.
“The idea that digital tools alone will lead to the decline of brokers overlooks what borrowers truly value,” he said.
“Brokers who continue to gain market share aren’t resisting digital, they’re using it to deliver what banks often can’t: real advice, choice across lenders, and a relationship built on trust.
“Banks investing in proprietary channels is expected, but it’s not new. Just look at CBA’s proprietary push alongside Bankwest’s growth in broker-lodged loans through a digital-first model.
“What’s changing faster is how brokers are using smart platforms, AI and automation to meet customers where they are. That’s what’s driving record broker market share.”
Simon Bednar, CEO of aggregator Finsure, agreed, saying that regardless of investment in tech, banks will struggle to compete with the personal service that brokers offer.
“We know that technology continues to evolve at breakneck speeds, enhancing the loan application process. However, we’ve seen time and time again that technology isn’t the silver bullet when it comes to attracting customers and lenders pursuing a tech-focused product offering are failing to gain traction,” he said.
“There remains a fundamental truth – the more technology develops, the more customers are seeking a more personal, more genuine experience with real people. Any digital solutions designed to eliminate all human interactions will ultimately fail.”
[Related: Banks plot broker bypass to reclaim market share: S&P]
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