Banks Adjust to Mortgage Brokers’ Growing Influence

Mortgage brokers are handling more home loans than ever, reshaping how major banks compete in the lending market. With brokers now arranging nearly 75% of all new home loans, big lenders are adapting to stay relevant. Some are launching digital tools, while others are building broker-friendly brands—but this shift could impact their profit margins.

The rise of mortgage brokers has been steady over the past three decades, with services like Aussie Home Loans pioneering the model. Today, firms like Australian Finance Group support thousands of brokers across the country, helping homebuyers find competitive loans. Home loan settlements through broker networks reached a record $31.8 billion in the first half of this financial year, up 13%.

Banks are acknowledging the trend, but the challenge is profitability. Loans introduced through brokers tend to generate 20-30% less profit compared to those sold directly through branches or bank websites. However, with traditional branches closing - over 2,000 have shut down since 2018 - banks need brokers to maintain their customer base. Some, like NAB, are investing in digital platforms to speed up approvals, while CBA is expanding its Bankwest brand to remain competitive in the broker market.

Macquarie Bank, which operates without branches and relies heavily on brokers, has been gaining market share, proving that a well-executed broker-focused strategy can be just as effective as traditional channels. While some analysts may wish for higher profitability from direct channels, the success of broker-driven models suggests that product innovation and customer-focused offerings may be the way forward.

AFG reported a 6% increase in net profit for the first half of the year, with revenue climbing 11%. With mortgage brokers continuing to dominate the market, banks may need to rethink their lending strategies to adapt to this new reality.

Source: Australian Financial Review, MFAA, Broker News