Home loan balances have tumbled at Bank of Queensland, with the lender prioritising a digital‑first proprietary mortgage push.
Bank of Queensland (BOQ) has reported a sharp H1 financial year 2026 contraction in its mortgage book as the regional lender overhauls its digital platforms and prepares for a return to home‑loan growth led by proprietary channels.
Housing balances shrink again
BOQ’s home lending book shrank by $2.24 billion in the first half of FY26, a 4 per cent decline on the second half of FY25, taking housing balances to $50.15 billion by February 2026.
The bank said the result reflected “lower settlement volumes as origination transitions to the digital platform and elevated run‑off”.
Within the group, performance varied significantly by brand.
BOQ’s home lending, excluding Virgin Money Australia (VMA) and ME Bank, fell by $1.7 billion over the half, with VMA’s book declining by $524 million, while ME Bank’s mortgage portfolio grew by $869 million.
Gross loans and advances across the group stood at $76.4 billion, down $1.4 billion or 2 per cent on 2H25.
The bank framed the pattern as a deliberate reweighting towards higher‑return business lending.
“The 1H26 growth profile reflects the group’s continued prioritisation of business lending growth over home lending while origination transitions to the digital platform and portfolio‑run‑off remains elevated,” BOQ said.
Broker pause bites as digital rollout continues
BOQ made clear that its earlier decisions on distribution were flowing through to housing volumes.
“The ME portfolio grew broadly in line with system, with an ongoing focus on optimising the acquisition mix. The contraction across VMA and BOQ reflects a combination of the decision to pause broker origination onto the legacy platform and elevated run‑off,” it said.
However, BOQ’s housing portfolio remains heavily skewed to the third‑party channel, with brokers responsible for 55 per cent of the total book and 71 per cent of new home‑loan flows in the past half.
Speaking to the margin pressure behind that mix, Finch indicated that many of those new loans were still being written below the cost of capital.
Group‑wide housing application volumes fell to 12,900 in 1H26, down from 14,400 in 2H25.
Within that total, ME Bank generated 9,300 applications (down from 11,100), while BOQ‑branded channels lifted slightly to 2,800 applications from 2,700 in the prior half.
BOQ also said “momentum is rebuilding in proprietary BOQ channels” and noted that branch performance was “stabilising on a smaller, more efficient footprint with 15 per cent increased application volumes in the half”.
The bank is pinning much of its future growth on its digital transformation.
Contraction easing, proprietary focus ahead
Despite the current pullback, BOQ signalled that the nadir in housing balances was near.
The bank said the home‑lending “contraction” was “easing, with growth expected in FY27 focused on digital proprietary and broker channels”.
That outlook reinforces earlier commentary from the bank that it would accept weaker housing growth through its transformation phase, before switching back to measured expansion.
It said a key plank of that next phase was a tilt towards higher‑margin direct origination.
BOQ said it was “reshaping economics of home lending through higher returning proprietary channel and optimised distribution footprint post branch conversion”.
Housing book: Conservative risk profile
While balances are shrinking, BOQ described its housing portfolio as conservative.
According to the bank, 99 per cent of customers have loan‑to‑value ratios at or below 90 per cent, with just 0.9 per cent of the portfolio above 90 per cent LVR and 1H26 flow above 90 per cent at 0.6 per cent.
Similarly, loans above 80 per cent LVR make up 7.5 per cent of the portfolio, with 1H26 flow above 80 per cent at 5.5 per cent.
Interest‑only loans (excluding construction) account for 10 per cent of the book and 13 per cent of 1H26 flows, while investor loans comprise 29 per cent of the portfolio and 32 per cent of new flows.
Fixed‑rate exposure is low at 9 per cent of balances and 7 per cent of 1H26 flows.
The portfolio is geographically diversified, with 29 per cent of housing balances in Queensland, 30 per cent in NSW and the ACT, 25 per cent in Victoria, 10 per cent in Western Australia, and the remaining 6 per cent across other states.
By channel, 43 per cent of the housing book has been sourced through ME broker, 11 per cent via ME proprietary channels, 4 per cent from VMA, 9 per cent from BOQ Specialist, 7 per cent from BOQ broker, and 26 per cent from BOQ proprietary channels.
Margin pressure and outlook
The housing contraction and competitive pressures are feeding through to earnings, with statutory net profit after tax for 1H26 down $136 million or 20 per cent on 1H25.
Net interest margin slipped to 1.67 per cent, 3 basis points lower than 2H25.
Against this backdrop, managing director and CEO Rod Finch framed the half‑year as validation of BOQ’s transformation plans.
“This result reflects the strong execution and transformation capability within BOQ. We continue on simplifying our business and have delivered another period of disciplined cost management,” he said.
“We enter a period of economic uncertainty with strong financial and operational resilience, a well‑diversified and prudently provisioned portfolio of assets and expect to optimise our balance sheet and funding position post completion of the capital partnership transaction with Challenger.”
[Related: BOQ’s home lending shrinks amid intense competition]
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