Credit ratings agency notes digital uptake could weaken broker value proposition
Australian banks are expected to ramp up efforts to shift home loan customers away from mortgage brokers and towards their own sales networks, according to S&P Global Ratings.
The move is seen as part of a broader strategy by banks to boost returns, as they increase investment in proprietary channels to claw back market share from brokers, who currently account for 76.8% of new mortgage origination, according to latest figures from the Mortgage & Finance Association of Australia (MFAA).
S&P credit analyst Simon Geldenhuys said that by funnelling more borrowers through direct outlets – such as physical branches, call centres, and digital services – banks could improve cost efficiency and profit margins.
“Less mortgage origination through brokers, all else equal, means better returns for banks and potentially better pricing for borrowers,” Geldenhuys said.
S&P noted that although many borrowers still prefer face-to-face advice when making major financial decisions, younger, digitally inclined consumers are more open to online mortgage solutions.
“We believe banks will capitalise on this,” Geldenhuys said. “By digitising the mortgage process and offering greater price transparency, banks might dilute the mortgage broker value proposition.”
He added that these developments could affect S&P’s ratings on Australian banks within the next two years. A successful pivot to in-house channels could strengthen earnings and bolster capital positions.
“This could shore up the already strong capital and earnings profiles of the Australia banks," Geldenhuys said.
The shift has raised concerns within the mortgage broking industry, where leaders argue that major banks are deliberately undermining brokers to increase control over distribution.
“Some banks want to return to the practices of the bad old days,” said Finance Brokers Association of Australia (FBAA) managing director Peter White in a previous address. “If this is the case, it’s a short-term and quite foolish strategy, considering what the broking sector delivers to lenders and consumers.”
White also warned against reducing competition in mortgage distribution. “The banks would love less competition like they had in the past, but the world has moved on, and Australian consumers will not stand for that,” he said.
He urged lenders to respect customer preferences, noting that many borrowers rely on brokers for guidance and access to a wider range of products. “We want to work well with the big banks,” White said. “They are the lender and get the business, so it’s not actually competition.”
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