The application of the proposed ‘best interest duty’ for mortgage brokers could be the sleeper issue that raises the bar on bank competition, and eats away at the established dominance of the big four.
Tough competition: More and more Australians apply for home loans via mortgage brokers, rather than going to branches of the major banks.UBS banking researcher Jon Mott, who has analysed the ramifications of the surge in market share of loan applications via mortgage brokers, says the use of the best interest duty will inevitably lead to greater mortgage churn and a higher level of discounting from lenders.
"The major banks' proprietary mortgage approvals have fallen by one-third since financial year 2015, and today represent only 37 per cent of total system sales, down from 48 per cent in financial year 2013," the UBS report states.Such is the shift away from applying for mortgages through bank branches that UBS estimates that, for example, ANZ’s writes only 4 per cent of total system loans through its proprietary branch network.
Already there is evidence that the 79 per cent market share that the big four have enjoyed has been coming under pressure.