Australia’s four largest banks are re-engineering their mortgage-origination strategies to reduce reliance on brokers and improve profitability amid intensifying competitive pressure and tight margins.

Mortgage brokers currently account for nearly eighty per cent of new home loans nationally — up from about fifty per cent six years ago — making the country one of the most broker-dependent markets globally.

Lenders including Commonwealth Bank of Australia (CBA), National Australia Bank (NAB), Westpac Banking Corporation (Westpac) and Australia & New Zealand Banking Group (ANZ) are now emphasising proprietary origination channels that are said to yield returns twenty to thirty per cent higher than broker-sourced volumes.

NAB’s chief executive, Andrew Irvine, noted during his full-year earnings call that the bank would “keep working hard to improve the penetration of proprietary home-lending, which is twenty to thirty per cent better returning than the broker book.”

The shift emerges as net interest margins — a key profitability metric — averaged only 1.8 per cent across the Big Four for the full year ended 2025, a modest improvement of two basis points from the prior year but still under pressure due to high competition and compressed rates.

Combined annual cash earnings for the group were about A$30 billion, down roughly 4.5 per cent year-on-year.

CBA leads the in-house push, with only 32 per cent of its home-loan originations broker-sourced in 2025, compared with higher shares at its rivals: NAB at approximately 59 per cent, and Westpac and ANZ at about 67 per cent each.

The latter two are now hiring additional home-finance bankers in an effort to regain share of proprietary originations.

Westpac’s chief executive, Anthony Miller, acknowledged, “We’ve got to get, for example, more bankers… we lost too many home finance managers, so we’re catching up on that.”

Broker commissions are a central concern for the banks.

Brokers may offer strong access to customers, but the commission payments — and weaker returns — from broker-originated loans are prompting lenders to review their distribution strategy.

In contrast, in-house channels may deepen customer relationships and reduce cost of acquisition.

Home loans represent up to 65 per cent of the major banks’ credit books, and have grown around five to six per cent over the past year, led by CBA’s home-loan book expanding to about A$665 billion.

Meanwhile, retail banking now contributes roughly 45 per cent of total profits for the Big Four, as they scale back other businesses such as wealth management and offshore assets.

The strategic pivot to in-house home-loan originations highlights how Australian banks are adapting to a low-rate, higher-cost environment.

As competition remains fierce and margins squeezed, the banks appear to be moving away from the broker-heavy model toward direct origination and tighter control over their mortgage portfolios, with implications for brokers, borrowers and the broader housing market.

The banks’ next challenge will be sustaining profitability while managing growth, regulatory constraints and the potential disruption from non-bank lenders and technology-enabled entrants.