Major banks win over half of new residential mortgages

In Short

• The banking sector has experienced significant consolidation, with customer-owned banks (credit unions and building societies) seeing an 84% reduction in numbers, driven by smaller banks’ need to achieve scale, diversify products, and invest in digital infrastructure.
• Major banks continue to dominate the lending landscape, but with notable shifts in competition. 
• Non-ADIs are becoming increasingly prevalent in residential lending, particularly for borrowers who might not qualify for traditional bank loans.
• Major banks and customer-owned banks demonstrate higher risk tolerance in their lending practices, suggesting a greater willingness to work with first-time homebuyers.
• Third-party mortgage origination has become increasingly important, with over half of new mortgage values being sourced through intermediaries such as mortgage brokers.  

Introduction

Competition, mergers and acquisitions in the landscape of banking and financial sector 

The number of banks in Australia has greatly declined the past two decades, driven by the consolidation of credit unions and building societies, which numbered 188 in 2004, but has reduced in number of 84% to 30 entities in the end of 2024. An issues paper, drafted by the Council of Financial Regulators (CFR) for their review into the small- to medium-banking sector, state that the increased mergers and acquisitions (M&A) activity is driven by the need for smaller banks to increase profits through achieving economies of scale and diversifying products.

Although larger banks spend more on technology and digital infrastructure, these expenses tend to be a larger share of operating expenses for smaller banks. Consumer preferences for more digital platforms, automated processes and the need to invest in cybersecurity, scam and fraud protection has added to the growing cost pressures faced by smaller banks.

PEXA has a solution for parties (including financial institutions and panel firms) who take part within a settlement process. Exchange users can make use of integration through application programming interfaces (APIs) to enable faster, more digitised settlement processes. Integration solutions include APIs that create mortgage documents, create workspaces and verify land title references, such as PEXA’s API suite.

The benefits of a faster, more digitised settlement process include: 

• Increased operational efficiency and productivity through elimination of time consuming, manual and repetitive processes.
• Increased customer satisfaction and higher on-time settlement rates.
• More timely property lodgement and settlement.

Integration can improve efficiency and improve customer satisfaction, fostering greater competition in the market for residential lending.  

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. Foreign subsidiaries and other domestic banks benefit most, with over 75% of their new mortgages, by value, sourced from third parties. As such, mortgages generated by third parties or brokers tend to favour tier 2 and tier 3 banks.

Key Findings

Major banks are still overwhelmingly the lender of choice, but non-ADIs are increasingly prevalent for residential loans 

• Major banks win a major share of new loans and refinances, both in volume and value terms, by lender category. This is unsurprising, given the landscape of the Australian financial banking sector.
• Non-bank financial intermediation (NBFI) through non-ADIs is on the rise in Australia. Non-ADIs are registered financial corporations, that although are not regulated, still are required to abide by the same regulatory constraints as banks for lending. Non-ADIs play an important role securing finance for those that would traditionally not be serviced by banks and more traditional lenders (i.e., borrowers who are self-employed, have bad credit history or are foreign or temporary residents). Non-ADIs also tend to have faster, more digitised settlement processes. The Reserve Bank of Australia (RBA) states that non-ADI loans are riskier on average, and borrowers may have a higher than average loan-to-income ratio compared to mortgages underwritten by traditional lenders.

Lending metrics

Major banks and customer-owned banks tend to take on riskier loans

Major banks and customer-owned banks tend to take on riskier loans, have higher LVRs and a larger share of loans that would require lenders mortgage insurance (LMI), suggesting that major banks are more likely to finance first home buyers, who have access to a range of assistance programs that can waive LMI. 

Conversely, non-ADIs tend to have a smaller median loan amount, the lowest average LVR and the smallest share of loans with a LVR above 80%. Although non-ADI lending doesn’t look as risky looking at LVRs and DVRs, this analysis doesn’t consider loan-to-income ratios, nor does it look at the individual circumstances of the borrower and their financial position. 

New Loans, Total Volume

Major banks settled approximately 190,000 new loans across NSW, VIC and QLD in FY25

Major banks unsurprisingly the highest volume of settlements out of any lender category. This represents modest growth of 3.9% compared to FY24. In comparison, new loan volumes for non-ADIs surged, increasing by 25.3%y/y. 

Major banks and their subsidiaries win approximately two-thirds of residential new loans

The market share of the major banks has remained relatively stable in the residential mortgage market over the past five years, with the ANZ-Suncorp merger, and the NAB acquisitions of 86400 and Citigroup’s Australian Consumer Business were the notable M&A activities over this period for the majors. 

Major banks (and their subsidiaries) are more dominant and win more new loans in VIC compared to NSW and QLD. There are a few potential drivers of this trend. VIC has a higher proportion of young families and first home buyers, who are more likely to have lower incomes and have difficulty saving for a deposit, possibly needing to pay LMI or obtain a waiver. Furthermore, Melbourne has a healthy supply of high-density apartments, particularly in the CBD – some of which are smaller than 50sqm and are sometimes considered too risky for financing.

New Loans, Aggregate Value

Non-ADIs have become the biggest non-big 4 lender

Major banks have the highest market share for aggregate value in NSW; lowest in QLD

Although non-ADI lending is become more prevalent in all states, the growth in QLD has surged over recent quarters, coinciding with a decline in the aggregate value of new loans financed by other domestic banks. 

The non-major share of financing for the aggregate value of new loans has also been declining in NSW, but this is more likely driven by major banks winning a large share of new loan volumes, rather than the non-majors financing relatively smaller loans. 

Refinances, Total Volume

Other domestic banks have a much stronger presence in QLD

Non-major lenders have nearly half of the market share for refinances in QLD

Refinances, Aggregate Value

Non-major lenders are more competitive in refinancing market than for new loans

The aggregate value of refinances previously peaked in the September quarter 2023, after the RBA began to increase the cash rates from April 2022 onwards. At that time, many mortgage holders had locked in incredibly low fixed-rate loans and there were concerns that a ‘mortgage cliff’, where borrowers, potentially unable to refinance because they wouldn’t be able meet the new serviceability criteria. However, there is very limited evidence that this had come to fruition.

Other domestic banks settle more refinances in QLD, but non-bank lenders are the biggest non-major players in NSW and VIC

In the same period that there were fears of a ‘mortgage cliff’ in 2023, smaller banks swept in to win more refinances from major banks through aggressive cashback offers and other incentives.  

Given the Reserve Bank of Australia’s (RBA) decisions to lower the cash rate in two consecutive meetings (February and May) in 2025, lenders have begun to make moves to win refinances, prematurely slashing fixed rate loans and increasing cashback offers. 

Note that the PEXA data only reflects external refinancing, so borrowers that choose to internally refinance are not captured by this dataset. 

If you’re interested in this data or have further enquiries about this report or other property and mortgage insights, please contact our Research team.

Contact us

Want to learn more about how APIs can transform your business? 

Get in touch

Definitions

The transactions examined in this report include residential property purchases valued over $10,000 that were funded with a single home loan. We have excluded: all commercial property; all purchases that have multiple home loans from different lenders associated with them; and all situations in which a single home loan is taken out to fund multiple property purchases. Our calculation of deposits excludes the transaction costs borne by buyers (such as stamp duty, legal costs and agent fees) and excludes any first-home buyer or other subsidies that may have contributed to the buyers’ funds. 

Statistics on refinances only specifically cover refinance settlements and excludes internal refinancing and is only captured when refinancing with a new bank. If a current customer already has a mortgage with a bank, and is successfully able to renegotiate their mortgage rate, this would not be captured in this data. 

Not authorised deposit-taking institutions (non-ADIs): These are entities that engage in lending activities but are not regulated by the Australia Prudential Regulation Authority (APRA). These entities can include money market corporations such as brokers, finance companies and securitisers. 

Loan values

For new loans: The median loan amount is taken from the loan proceeds used in the property settlement on the buyer side. The average loan amount is reported for all residential property settlements with a new loan. It should be noted that the total loan amount issued by the lender may differ from the loan amount used in our calculation. This would be the case, for instance, if a buyer borrows additional funds, beyond what was required to fund the purchase. For example, if a buyer requires $400K to settle the purchase of a property (after accounting for any deposit), but decides to take out a loan for $450K with the intention to use the additional $50K for future renovations, our calculation would use the $400K loan proceeds used in the initial settlement and not the $450K total loan amount. 

For refinances: The median loan amount for property refinances includes both residential and commercial. It should be noted that the median loan amount is of discharged mortgages, not the newly refinanced mortgages. For example, if an owner had $500K outstanding on their home loan and decided to refinance a new amount of $550K, the $500K is used for the calculation, not the $550K. Refinances include external refinances (where the home loan is refinanced with a different lender) and exclude internal refinances (where the home loan is refinanced with the same lender). 

Copyright 

© 2025 PEXA. PEXA and its licensors own all rights (including copyright) in this document. No content may be copied, modified, published or distributed to any other party with PEXA’s prior written permission. All Rights Reserved. 

PEXA Disclaimers 

This document is general in nature. It doesn’t constitute advice, doesn’t take into account your circumstances, and shouldn’t be relied upon. Please seek professional advice where appropriate. All information is provided “as is” without representation, guarantee or warranty of any kind, whether expressed or implied, including any warranty that the information is accurate, current, reliable, complete, or suitable for any purpose, or any guarantee that any forward-looking statements, including estimates, projections and opinions will be achieved or will prove to be correct. Any estimates, projections and opinions are based on assumptions and events that may be subject to change (without notice). To the full extent permitted by law, PEXA excludes all liability for any loss or damage however arising out of or in connection to this document, including in relation to reliance by you or any third party on the information contained in this document. By accessing and using this document, you acknowledge and agree to the following additional disclaimers that apply to information in the document from PEXA’s licensors. 

South Australia 

WARNING 

The information contained in this dataset is extracted from the records of land status and cadastral boundary definition held by the Government of the State South Australia (the “State”). The information is not represented to be accurate complete, or suitable for any purpose, at the time of its supply by the State, and may have changed since the date of supply by the State. The software by which the information is provided is not represented to be error free. No responsibility is accepted by the State for any reliance placed by any person upon the information, or the software by which it is provided. Persons acquiring or using the information and its associated software must exercise their independent judgement in doing so. 

COPYRIGHT 

Copyright in this information remains with the Crown in right of the State of South Australia. The information is reproduced under licence from the Crown. 

PRIVACY 

The information contained in this dataset must not be used for the purposes of compiling contact lists, whether personalised or not.