From a Handful to Hundreds: The Evolution of Mortgage Lending in Australia
Not long ago, Australia’s mortgage market was dominated by a small, tightly held group of lenders—primarily the Big Four banks (CBA, ANZ, NAB, and Westpac) alongside a smattering of regional banks and building societies. In the 1980s and early 1990s, access to credit was relatively restricted, and product diversity was minimal. Fast forward to today, and the lending landscape looks vastly different. Australia now boasts over 100 mortgage lenders, encompassing not only traditional banks but also non-bank lenders, fintech platforms, private credit funds, and specialist mortgage providers. This explosion in lending options has fundamentally transformed how Australians borrow, creating both opportunities and new considerations for borrowers and brokers alike.
The Rise of Private and Commercial Mortgage Lenders
Several factors have driven this increase in lending diversity. One of the most significant is the tightening regulatory environment post-GFC, which has pushed traditional banks to be more cautious, especially in commercial and small-business lending. In this gap, private and commercial mortgage-backed lenders have stepped in. These lenders often offer greater flexibility, faster turnaround times, and a willingness to assess risk on a more case-by-case basis—ideal for borrowers who fall outside of rigid bank credit policies.
Concurrently, Australia’s surge in small business formation and the natural evolution of the financial sector have created a demand for more tailored lending solutions. Many of these private lenders are backed by sophisticated investor capital, and they cater to niches such as development finance, bridging loans, and SMSF lending—areas where traditional banks may shy away due to risk or regulation.
A Global Perspective: Is Australia Keeping Pace or Overheating?
When compared to mature markets like the United States and the United Kingdom, Australia’s lending diversification mirrors broader international trends. In the U.S., mortgage-backed securities and non-bank lenders are well-established, and the UK has also seen significant growth in specialist and challenger banks. However, unlike the U.S. in the pre-GFC era, Australia has maintained comparatively conservative lending standards, with a strong focus on serviceability and responsible lending.That said, concerns about rising household and business debt persist. Australia does rank high globally in terms of household debt-to-income ratios. Key drivers of this debt growth include strong immigration, which boosts housing demand; increased investor activity chasing yield in a low-rate environment; and robust business investment fueled by global capital inflows. Still, when benchmarked historically and internationally, Australia’s debt levels remain manageable, particularly given its high asset ownership rates and generally prudent underwriting practices.
What This Means for Brokers—And What Lies Ahead
For mortgage brokers, the proliferation of lenders represents a golden age of opportunity. With more lending options, brokers can better match borrowers with products that meet their unique financial situations—often improving client outcomes and strengthening long-term relationships. Additionally, many non-bank and private lenders actively engage brokers as their primary distribution channel, offering strong incentives and support.
However, increased choice also brings potential pitfalls. The Global Financial Crisis highlighted how lax lending standards and poorly understood risk can spiral into systemic issues. While Australia largely escaped the worst of the GFC, the risk of over-extension, particularly in commercial lending, is a reminder that vigilance and due diligence are crucial. Looking forward, we can expect continued innovation, including tech-driven lending solutions and AI-enhanced credit models. The key challenge for the industry will be balancing innovation with responsibility—ensuring that lending supports long-term economic resilience rather than short-term speculation.
