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Vertical integration strangling mortgage market

The major banks’ stranglehold on mortgage distribution is stifling competition and locking smaller lenders out of the market, according to Firstpoint director Troy Phillips.

Speaking to Mortgage Business, Mr Phillips said licensing has restricted smaller lenders in gaining market share and has taken competition out of a market owned by the majors.

“The market is vertically integrated and CBA and NAB have a stranglehold on distribution,” Mr Phillips said.

“It is difficult for smaller lenders like Suncorp to get on the aggregation panels,” he said, adding that licensing has actually made brokers fearful of dealing outside their panels.

“It’s like Coles and Myer; if you want to get on the shelf you have to pay the price.”


Mr Phillips is the founder of mortgage lender Firstpoint NB and wholesale funding specialist MAS. He has been involved in the funding and distribution of Australian mortgages since 1985. 

“Some of the non-bank lenders and credit unions have some decent product, but they are not getting full exposure because the banks own all the distribution,” he said.

By contrast, almost all prospective borrowers are happy to consider all lenders, according to figures from comparison website HelpMeChoose.com.au.

This year to date, 93 per cent of visitors to the comparison site said they would consider all lenders for a home loan, with only 7 per cent preferring to go to a major lender only.

However, according to the latest AFG Competition Index released this week, the major banks still hold a 75 per cent share of the broker-originated home loan market.


“Competition has been partly restored in the past two years, with non-major lenders being quite agile in targeting specific products and markets,” AFG general manager of sales and operations Mark Hewitt said. “But they are finding it a struggle to challenge the overall dominance of the major lenders.

“Collectively, they still only account for around a quarter of all new home loans each month,” he said.

“We would like to see this figure higher and are looking forward to seeing if the Financial Services Inquiry offers a solution.”

NAB snapped up major aggregators FAST, PLAN and Choice from Challenger Mortgage Management in October 2009, acquiring Advantedge the same year.

More recently, in 2012, CBA upped its stake in Aussie to 80 per cent with a view to subsequently acquiring the business in full.

“But the customer doesn’t know about all of these deals, and a lot of these smaller lenders and credit unions aren’t on the panels; they are actually prohibited,” Firstpoint’s Mr Phillips told Mortgage Business.

“Licensing has actually taken competition out; they can’t compete,” he said.

Mr Phillips added that brokers are not to blame for pushing a majority of loans to the majors. CBA and NAB have fostered relations with the third party for so long that brokers have no reason to give smaller lenders their business, he said.

“But it will change,” he said. “Monopolies don’t last forever.”

Vertical integration strangling mortgage market

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