Australia's Mortgage Market is 'Broken' — Industry Advocates Demand Systemic Reform

Australia's Mortgage Market is 'Broken' — Industry Advocates Demand Systemic Reform

Industry advocates have issued a stark warning to the federal government: Australia's mortgage market architecture is failing too many borrowers, and without systemic reform, the problem will only worsen as interest rates remain elevated.

The call, reported by The Adviser this week, comes as multiple consecutive rate hikes have exposed the rigidity of Australia's mainstream lending model — a system where the Big Four banks dominate with standardised products that leave self-employed borrowers, migrants, and anyone with a non-traditional income profile effectively locked out.

What's 'Broken' About the Current System?

Australia's dominant mortgage framework is built around a relatively narrow definition of "creditworthy borrower" — typically someone with full-time PAYG employment, at least two years of payslips, and a clean credit history. This model works for the majority of salaried workers but consistently fails groups including:

• Self-employed Australians (approximately 2.1 million people, ABS data)
• Recent migrants and PR holders with limited Australian credit history
• Small business owners whose income doesn't fit standard bank templates
• Contractors and gig workers with variable income patterns

The cumulative effect: hundreds of thousands of creditworthy Australians — people who manage their finances responsibly but simply don't fit the bank template — are denied access to home ownership or forced into unfavourable terms.

The Non-Bank Sector: Already Building the Alternative

While the policy debate continues, non-bank lenders have already constructed the alternative architecture that advocates are calling for. In Australia, the non-bank lending sector has grown significantly over the past decade, with institutions like MPFG Capital providing purpose-built products for borrowers the major banks won't serve.

Key non-bank innovations that address the 'broken' system include:

• Alt Doc loans: Accept BAS statements, accountant letters, and bank statements as income evidence — no payslips required
• Flexible LVR assessments: Consider the full picture of a borrower's assets and business performance
• Case-by-case underwriting: Human decision-making rather than automated rejection systems
• Faster approvals: Without bureaucratic bank committee processes, qualified borrowers can receive decisions faster

According to APRA data, non-bank lenders now represent a meaningful and growing share of new mortgage originations, particularly in segments like self-employed lending and high-LVR products.

The Chinese-Australian Community and the Lending Gap

For Chinese-Australians — many of whom are self-employed, operate family businesses, or hold income structures spanning Australian and overseas sources — the 'broken' mainstream model has been a persistent barrier.

Common scenarios where banks say no but non-bank lenders can say yes:

• Restaurant owner with strong cash flow but complex BAS history
• Recent PR holder with high income but less than 2 years Australian employment
• Business owner with multiple income streams including dividend income
• Overseas investor with Australian income component

Non-bank lenders can assess income evidence more holistically, recognising the reality of how successful small business owners actually manage their finances.

What Borrowers Should Know

If you've been declined by a major bank, it is not a verdict on your creditworthiness — it is a verdict on whether your income looks like a bank's preferred template. The non-bank sector exists specifically to serve borrowers who fall outside that template.

Contact MPFG Capital to discuss Alt Doc and flexible lending options that may suit your circumstances.

This article is general information only and does not constitute financial advice. Loan outcomes depend on individual circumstances. Credit provided subject to MPFG Capital's lending criteria. ACL 553698.