Australia's big four banks move to bypass mortgage brokers as profits squeezed

[SYDNEY] Australia’s biggest banks are ramping up efforts to reduce their reliance on mortgage brokers in the nation’s US$1.6 trillion home loan market, looking to offset pressure on profit margins from lower interest rates, higher costs and intensifying competition.

Mortgage brokers account for almost 80 per cent of new home loans in Australia, up from about 50 per cent six years ago, UBS estimates, making the country one of the most broker-reliant markets globally.

The shift to more in-house home loan originations was a key strategic theme as Westpac, National Australia Bank (NAB) and ANZ released their full-year results over the past two weeks.

They are seeking to boost their share of a mortgage market led by Commonwealth Bank of Australia (CBA), the most profitable “Big Four” lender and the only one that originates the majority of its home loans.

ANZ, NAB and Westpac said they planned to hire more bankers as part of an effort to lift their share of residential lending.

“We’re going to keep working hard to improve the penetration of proprietary home lending, which is 20 per cent to 30 per cent better returning than the broker book,” NAB CEO Andrew Irvine said on an earnings call.

The in-house mortgage push comes as the banks’ profits are being weighed down by lower interest rates, cut-throat competition and litigation and restructuring related costs at some of the lenders.

Net interest margins, a key gauge of profitability, rose just 2 basis points for the Big Four banks in the full-year ended in 2025 to 1.8 per cent, though that was better than a 6 basis points decrease the prior year amid fierce mortgage refinancing competition.

Analysts forecast future margins will come under pressure, especially as interest rates remain lower.

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In Australia, many consumers prefer using brokers to help them comparison-shop for the best interest rate or overall package. But the selected bank then pays a commission to the broker, cutting into its margins.

While the proportion of broker-originated mortgages in Australia is lower than the nearly 90 per cent in the UK, it is much higher than in Canada, France and Germany, where it ranges from 40 per cent to 45 per cent.

“A lot of the conversations Australian banks are having is whether it’s time to look away from mortgage brokers in a higher-cost, lower-rate environment,” said Barry Trubridge, PwC’s Australian financial services leader.

“Banks see better returns and stronger customer ties through proprietary channels, without paying commissions.”

Home lending accounts for up to 65 per cent of the top Australian banks’ credit books, according to regulatory data, and has become increasingly central to earnings as they retreat from wealth management, financial advice and offshore assets.

Retail banking now contributes about 45 per cent of total profits for the Big Four.

The banks, led by CBA, reported combined full-year cash earnings of nearly A$30 billion (S$25.4 billion) in 2025, down 4.5 per cent from a year earlier, as margins weakened across key lending segments.

“Like any business, the banks are trying to protect their margins. It’s a highly competitive market where there are the four big banks plus others aggressively chasing market share,” said David Heathcote, KPMG’s banking sector leader.

The lenders have been expanding the size of their mortgage books over the last year, led by CBA with 6 per cent growth to A$664.7 billion in its financial year ended June 30. The others reported around 5 per cent growth in their financial year ended September 30.

CBA is by far the market leader in the proportion of loans written in-house, with brokers taking a share of just 32 per cent in its last financial year, down from about 38 per cent in 2023.

At NAB, brokers were used for about 59 per cent of loans this year, down from 65 per cent two years earlier.

But at Westpac and ANZ, the proprietary channel has been losing share to loans written by brokers.

At Westpac, broker-written loans rose from 52 per cent in 2023 to 67.5 per cent in 2025, while at ANZ they climbed from 64 per cent to 67 per cent over that period, leading to questions from analysts at recent briefings.

“We’ve got to get, for example, more bankers,” Westpac CEO Anthony Miller said on an earnings call. “We lost too many home finance managers, so we’re catching up on that.” REUTERS