Brokers are writing less than 50 per cent of mortgages for the big four banks but have become the dominant channel for Australia’s smaller lenders, according to fresh APRA figures.
APRA’s quarterly bank property exposure data for March found that brokers wrote $31.3 billion worth of home loans for the big four, up 8.7 per cent over last year.
While brokers currently account for 46.6 per cent of major bank mortgages, Australia’s non-major lenders are seeing 52.1 per cent of loans written through the third-party channel.
APRA figures found non-major broker originated loans increased by 19.7 per cent between the March 2016 and March 2017 quarters. Foreign bank subsidiaries saw a significant increase in broker loans, up 92.9 per cent over the year.
The data comes after a number of reports in recent weeks have flagged changes to the third-party distribution strategies of the major lenders.
A recent Morningstar research report into Mortgage Choice noted a number of “industry headwinds” for the broking industry, including a change of direction in the mortgage strategies of two major banks.
“Changes in mortgage distribution strategy by Australia’s two largest mortgage banks CBA and Westpac will over time likely slow the growth rate of home loans sourced through brokers,” the report said.
These changes have led one alternative lender to urge mortgage brokers to diversify their offering.
Pepper’s managing director of Australian mortgages and personal loans, Mario Rehayem, told The Adviser that brokers need to look beyond the big banks in today’s market.
“Your business model, and the whole value of your business as a broker, hinges on the diversity of your back book,” Mr Rehayem said. “If you want to build a business, an asset that you can one day sell as a going concern, the buyers will be looking at the diversity of your back book, the run-off rate and your arrears,” he said.
"Imagine if more than one major bank changed their distribution strategy overnight. What’s going to happen to the broker market? How will brokers react to that? If you’re going to be pigeonholed to one bank and tomorrow that bank decides that their belly is full of third-party business, what are you going to do?”
Mr Rehayem said that brokers shouldn’t be “cherry picking” clients but instead position themselves to satisfy every type of consumer. He added that brokers are being forced to radically change their business models as banks change their appetites.
Australia’s largest mortgage provider, CBA, has been clear about its plans to grow its proprietary channel, telling The Adviser in February that it was a “strategic priority” for the group.
[Related: Major bank branch undercutting broker rates]