The aggregator has warned that rising bank dominance threatens competition, housing affordability, and cost-of-living relief.
Australian Finance Group (AFG) – one of the nation’s largest mortgage broker aggregators – has called on the federal government to use the upcoming 2026–27 budget to shore up mortgage market competition, saying that structural advantages enjoyed by the major banks are pushing up borrowing costs and undermining housing affordability.
In its pre‑budget submission, titled Sustaining competition in Australia’s residential mortgage market, AFG outlined that mortgage repayments are the biggest single expense for most owner‑occupiers and that even a modest shift in rate or product structure could substantially impact household budgets.
The submission stressed that keeping the residential mortgage market competitive was not just a financial policy goal, but “a cost‑of‑living issue”.
Brokers, BID, and consumer outcomes
AFG’s starting point was to emphasise that a competitive mortgage market delivers lower prices, greater choice, and better outcomes for households, with the company underlining that brokers were central to that ecosystem.
The submission noted that more than 77 per cent of new residential mortgages were now arranged through brokers, which it said reflected a clear consumer preference for a channel that could compare lenders, explain complex loan structures, and “secure more competitive outcomes.”
It highlighted that the legislated best interests duty (BID), in place since 2021, obliged brokers to act in the best interests of their customers – a safeguard that “does not apply to banks when selling their own products via their direct lending channels”.
AFG pointed to industry data to say that the current framework was working, citing Deloitte’s Value of Mortgage and Finance Broking 2025 report, which found that complaints against mortgage brokers and aggregators accounted for less than 1 per cent of all banking and finance complaints.
“The evidence clearly demonstrates that the current regulatory regime is fit for purpose and working in the interest of consumers,” it said.
On that basis, AFG urged the federal government to protect the existing broker regulatory framework, including BID, and to avoid reforms that would weaken the broker channel.
Major bank advantages and housing costs
Despite the growth of mortgage broking, AFG said that Australia’s home lending market remained “highly concentrated”, with direct consequences for housing affordability and household pressures.
Reduced competition, it said, ultimately flowed through to higher mortgage costs.
The submission traced the source of the imbalance to the global financial crisis, when wholesale funding guarantees, capital settings, and merger approvals “significantly” strengthened the majors’ position.
It added that pandemic‑era interventions, particularly the Reserve Bank’s Term Funding Facility, further amplified these advantages.
According to AFG, these structural benefits allow major banks to undercut rivals with “sub‑economic pricing”, use short‑term incentives, such as cashback offers, and reprice existing customers once introductory offers roll off.
“While such practices may appear competitive in the short term, their long-term effect is to weaken lender diversity, reduce competitive tension and place upward pressure on mortgage costs over time – directly undermining housing affordability,” AFG warned.
Funding access flagged as ‘structural market failure’
AFG identified access to competitively priced funding as “the single most significant barrier” facing non‑major lenders.
It said that without long-lasting funding solutions, smaller lenders would struggle to compete with the structurally lower cost of funds available to the big four.
The submission said that over time, the funding imbalance would “weaken competitive tension, reduce lender diversity and place upward pressure on mortgage pricing, with direct consequences for housing affordability.”
The submission characterised the issue as a “structural market failure rather than a lack of consumer demand or viable business models” and said it warranted careful policy attention.
AFG - which has its own securitisation arm - called on the government to “examine mechanisms to improve non‑major lenders’ access to competitively priced funding”, including targeted, competition‑focused funding or securitisation measures in areas where market shortcomings are identified.
AFG’s 3 key recommendations
AFG’s recommendations to the government are grouped into three main points:
- Protect existing mortgage broking regulatory framework, including BID, which is delivering strong consumer outcomes and supporting housing affordability and cost‑of‑living relief.
- Avoid regulatory changes that would weaken or disrupt the broker channel, recognising its critical role in sustaining competition and consumer choice.
- Examine options to improve access to competitively priced funding for non‑major lenders, including:
· Targeted, competition‑focused funding or securitisation measures where market failures are clearly identified.
· Continued consideration of relevant international experience as part of a broader assessment of policy options.
The submission concluded that Australia’s mortgage market “delivers the best outcomes when competition is strong, lenders are diverse and consumers have genuine choice”.
It describes brokers as “essential” to not only aiding individual households in comparing options and refinancing when appropriate, but also exerting competitive pressure that benefits all borrowers.
“Policy settings that weaken the broker channel or entrench funding advantages for the largest institutions risk accelerating market concentration, reducing choice and increasing long‑term housing costs,” AFG said.
[Related: AFG takes minority stake in Melbourne brokerage]
