Smaller lenders are being locked out of aggregation panels as banks continue to buy up distribution.
Greater consolidation and a move towards vertically integrated business structures are reducing the number of lender options in the market, according to third-party specialist Steve Sampson.
“With the banks buying into brokerages, they will lean on those businesses to ensure that as an investor they are well promoted within that panel, otherwise there is no point,” Mr Sampson told Mortgage Business.
“Obviously the banks don’t want too many lenders on there because they want to promote their own products,” he said.
“Those that have that vertical integration structure promote their own products at favourable rates and commission, which gives them ability to cross sell.”
While consolidation is creating less independence among brokers and reduced choice for customers, one benefit is the preservation of broker commissions, Mr Sampson said.
“If you consolidate a couple of businesses, one of your primary aims for that is to reduce costs,” he said.
“So in turn I think it will help preserve commission structures.”
The majors have come under fire in recent months for their ownership of aggregators and brokerages, particularly from the regional and customer-owned banks.
In a combined submission to the Financial Systems Inquiry, the regional banks (Bank of Queensland, Bendigo, ME Bank and Suncorp) warned about the risks to borrowers of major bank ownership of mortgage brokers.
“Bank ownership of mortgage broking platforms is potentially a competitive distortion and has consumer protection implications,” the submission said.
“One reason prospective borrowers seek a loan from brokers is to receive an impartial offering of housing loan products, yet this is potentially compromised if the broker owner is also a housing loan issuer.”
Mr Sampson said he has seen evidence of unwillingness among bank-owned aggregators to add smaller or new lenders to their panels.
“I think we are in a real danger of too many aggregators being owned too much by the banks,” he said. “It’s a concern.”