Banks turn on the marketing - and loosen the screws
With fewer buyers in the pipeline, banks are relaxing how they assess borrowers and sharpening price competition. Brokers say payslip requirements have been cut, with Angelo Benedetti of Oracle Lending Solutions noting banks might now accept two or three instead of four or five. Some lenders are also more tolerant of a missed credit card payment, are greenlighting smaller purchases, and are counting more projected rent for investors. One lender lifted the rental income assumption used in applications to 95% from 80%, said Aaron Christie-David, who runs Sydney brokerage Atelier Wealth.
The sweeteners are not subtle. Commonwealth Bank of Australia introduced a mortgage rewards program granting credits for electricity, travel, and phone and internet plans. ME Bank, part of Bank of Queensland Ltd., is pitching A$3,000 to new buyers or those refinancing.
Pricing is moving too. Macquarie Group Ltd. cut mortgage rates in June outside the normal cycle, triggering a string of similar moves from rivals. UBS data show rates for owner occupiers with 20% equity were 12 basis points lower versus benchmark lending rates through August, a sign banks are shaving margins to protect share. "Home lending is becoming more competitive," said UBS bank analyst John Storey in Sydney, adding that lenders are targeting refinance offers and pushing harder on price.
Brokers now sit at the center of the fight
Brokers originate roughly four in five new Australian home loans, and banks are leaning in. Macquarie has climbed to about 7% of the mortgage market and is building through broker partnerships. "We're not changing our strategy - we're doubling down," said Wendy Brown, who oversees home loan and commercial broker sales at Macquarie Bank. The rise of brokers, she said, has given households more choice.
Refi deals are surging through that channel. Paul Shahinian at Econfinance in Sydney said lenders are "trying everything they've got to try and increase people's borrowing capacity," citing recent packages with cash incentives and "aggressively low rates." He said refinancing now makes up around half of his firm's business, about double the share before the May budget ended tax incentives for property investors.
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Why demand has cooled so fast
Prices are falling at a pace not seen since Cotality began tracking the market in 1980. Across major cities, values slipped 4.3% in the September quarter, and Sydney is 8.6% below its February peak. The backdrop: Australia ran the most forceful interest rate tightening among advanced economies this year, plus harsher tax treatment for property removed a long-standing draw for investors.
The top end is wobbling hardest. Christie-David described an October deal where a seller took A$4.6 million after early bids near A$5.8 million, about a 20% slide. And a waterfront home in Point Piper sold in September at roughly 12% below its initial A$85 million ask.
"Everyone's saying the market is down around 10%. No, that top end of the market is down nearly 20%," he said. Morgan Stanley now sees a worst-case national drop of up to 15% from the peak, widened from 10%.
The investor angle
For banks, this is no sideshow. Mortgages are a core profit engine: the four majors earned A$43 billion last year, including A$16.9 billion from owner occupiers with a mortgage, per Australia Institute research. But application volumes are shrinking, and National Australia Bank's Lin Lu put it plainly: "The home lending market has clearly softened." The scramble for customers "remains strong," and lenders can compete on "speed, quality and certainty," not just headline rate, she said.
Expect more cross-sells and sharper pricing as lenders try to keep loans flowing, while tilting toward business lending to fill any earnings gap. Storey said banks have "multiple levers and mechanisms" to navigate a tough backdrop, but the market is not convinced corporate lending growth will fully offset any shortfall in retail profitability.
The bottom line: watch how far underwriting loosens, how much refi volumes stick, and where pricing lands relative to benchmarks. Those levers will shape both mortgage costs and bank margins from here.
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