Australian Mortgage Market Competition: What You Need to Know

By R Bakshi | July 17, 2025

Australia’s banking world is changing fast. This is creating a more competitive mortgage market. If you’re looking to buy a home or invest, this is great news. It means more choices and potentially better deals for you.

Key Points

• “Australia’s banking sector is shrinking but becoming more competitive, with fewer small banks surviving, while non-bank lenders are gaining ground.”
• “Technology is speeding up the mortgage process, helping smaller lenders catch up.”
• “More and more borrowers are using mortgage brokers to find the best home loans, which is opening up more opportunities for non-major banks.”
• “The next few years could reshape who Australians borrow from — and how fast they get approved.”

Banking Is Changing

New research from PEXA shows big shifts. Their “Mortgage Trends Report” tells us about these changes. We see fewer small banks. There are more digital systems now. And more lenders are helping people who don’t fit normal bank rules.

Twenty years ago, there were many customer-owned banks. Now, most are gone. Many have merged to survive. Why? They need to save money. They must invest in expensive technology. And customers want faster online service and strong fraud protection. Marcella Choy, a Senior Research Analyst at PEXA, says these tech costs hurt smaller banks more.

Big Banks Still Lead, But Competition Is Up

The “big four” banks (Commonwealth Bank, Westpac, NAB, ANZ) still have most of the home loan market. But other lenders are growing fast. Non-bank lenders are reaching more borrowers. They help people who struggle to get loans from big banks. This includes self-employed people, those with poor credit, or temporary residents.

The Reserve Bank of Australia (RBA) says non-bank loans can be riskier. But they fill a clear market need. Even big banks are now taking more risks. They give more loans with high loan-to-value ratios (LVRs). More loans need lenders’ mortgage insurance (LMI). This shows they work more with first-home buyers, who often have smaller deposits.

Mortgage Brokers: Your Partner for Home Loans

Mortgage brokers are now more important than ever. PEXA’s Marcella Choy states, “Over one half of the aggregate value of new mortgages is sourced through third parties, such as mortgage brokers, and this trend has only increased over time.” This helps smaller and foreign-owned banks the most. Some get over 75% of their loans through brokers.

Digital tools, like PEXA, also help. They help banks, especially smaller ones, finish settlements faster. This cuts paperwork. It speeds up loan processing. This boosts Australian mortgage market competition.

Big banks still approve the most loans. In 2024–25, they approved about 190,000 new loans in NSW, Victoria, and Queensland. That’s a 3.9% rise from last year. Victoria sees big banks dominating. This is partly due to many young families and first-home buyers. They often have lower incomes and may need LMI.

What’s Next for the Mortgage Market?

Regulators are watching closely. The Council of Financial Regulators (CFR) is checking on smaller banks. The Australian Competition and Consumer Commission (ACCC) has new powers. They can stop mergers that hurt competition. Starting next year, companies must share more details before merging. This includes competition risks. This aims to keep the banking sector competitive. It stops any one player from getting too powerful.

Overall, PEXA’s report is good news for home buyers and investors. More competition makes Australia’s “Big 4” banks work harder. They must innovate and be more competitive in the Australian mortgage market. Interest rates are falling again. New digital tools are changing how loans work. The next few years could change who Australians borrow from and how fast they get approved.

Ready for Your Next Home Loan?

At EZ Mortgage Broker, we help you understand these changes. We’ll find the best home loan for you. We work with many lenders. This means you get access to the best options.

Contact us today to talk about your mortgage needs!

Email: [email protected] Phone: 1300 050 099