Over the past week, all four of Australia’s biggest banks have reported falls of between 12% to 20% in new home loan applications since the May federal budget.

After announcing it would keep interest rates on hold, the Reserve Bank confirmed demand for new home loans has “declined noticeably”.

For anyone currently in the market for a new or refinanced home loan, that’s good to know – because banks are now competing even harder to win customers.

The big four’s dominance is waning

Since the start of June, at least 31 smaller lenders – though not yet the biggest four – have begun offering slightly lower variable home loan rates for new customers.

One of them is Macquarie Bank. It’s grown its share of Australia’s mortgage market from just 0.19% in 2010 to now being the fifth-largest home loan lender, with 7.33% of home loans by June this year.

That’s still far less than “the big four” had in June this year:

Commonwealth Bank, with 25.36% of home loans, the only major bank to maintain its market share since 2010 (when it had 25.27%)
Westpac on 20.66% (down from 26.84% in 2010)
NAB’s 14.03% (down from 15.68% in 2010)
and ANZ’s 13.21% (down from 15.31% in 2010).

But the direction of change has been striking. In the eight years that outgoing chief executive Shemara Wikramanayake has overseen Macquarie Group and Macquarie Bank, its Australian mortgage portfolio grew from $A34.3 billion to $191.5 billion in June 2026: more than fivefold growth.

Earlier this year, Commonwealth Bank’s chief executive Matt Comyn described Macquarie as a “formidable competitor” on home loans.

What is Macquarie’s strategy – and could it eventually overtake its bigger rivals?

Heavier reliance on mortgage brokers

Macquarie has long been best known as a global financial group, with major business in infrastructure and investment banking, rather than as an everyday retail bank. Its profitability – including investments in projects from toll roads to airports – earned its nickname as “the millionaire’s factory”.

But more recently, Macquarie Bank has expanded rapidly into home loans, without reproducing the business structure of the big four banks.

Across the industry, mortgage brokers facilitate around 81% of all Australian mortgages. But Macquarie reports far more of its home loans – around 95% – come via brokers.

Macquarie’s online-only, broker-led banking model gives it a significant cost advantage over rival established banks, which still have to maintain extensive branch, ATM and cash networks across Australia.

Fierce competition from small lenders

Interestingly, if you compare all home lenders, Macquarie doesn’t always offer the lowest rates.

At least 49 lenders currently offer variable home loan rates below 6%. In contrast, Macquarie’s lowest advertised variable rate is 6.04%.

Instead, Macquarie combines relatively competitive rates and loan costs with a heavy focus on fast processing, relatively predictable credit decisions, and a digital system giving brokers a clear view of how loan applications are progressing.

This approach reduces time and stress for buyers waiting to secure financial approval.

Macquarie also targets low-risk borrowers with stable incomes, good credit records and healthy deposits: the kind of customers the big four want to retain.

The battle for household savings

The Reserve Bank has left the cash rate on hold at 4.35%, but is open to further rate hikes if needed to curb inflation.

Higher borrowing costs reduce housing demand and the capacity of borrowers to repay. At the same time, higher rates make savings accounts more attractive.

This helps explain why Macquarie’s savings and term deposit strategy is closely connected to its mortgage expansion. Macquarie’s deposits reached $223.3 billion in June.

It’s increasing its competition with the big four banks for household savings, as well as mortgages, by offering at-call savings accounts with interest rates over 5%. These have fewer conditions than the big four’s comparable accounts. These deposits provide an important source of Macquarie’s mortgage funding.

Challenges ahead

Macquarie Group’s CEO, Wikramanayake, is stepping down in November. Her successor is Greg Ward, who has led Macquarie’s banking and financial services division since 2013.

Given Ward’s background, banking looks set to remain important to the company’s future. But there are looming challenges.

Changes in the May federal budget mean that, from July 2027, negative gearing for future residential investments and changes to the capital gain tax discount will favour new builds, not existing homes.

All of the big four banks have reported a bigger drop in investor loans than for owner-occupiers. Westpac forecasts its investor loans will halve next financial year, though the Commonwealth doesn’t expect as sharp a fall.

Competition helps customers

Is Macquarie set to become a big four bank any time soon? Given its rapid growth, some analysts have tipped Macquarie could overtake ANZ or NAB as a big four lender – possibly within the next few years.

Even if that prediction proves too optimistic, as I suspect it might, it’s not the sole measure of Macquarie’s impact in recent years.

In recently published research, my colleagues and I found that having easier and faster access to more alternative lenders improves customers’ bargaining position, giving established banks less ability to charge higher rates.

Smaller home lenders can add pressure on bigger banks to price more competitively, process their application more quickly and work harder to retain good customers.

Even if Macquarie remains in fifth place among home loan lenders, its share of the market is now large enough for even its biggest bank rivals to take notice.

With fewer people applying for home loans, every bank will be working harder to poach customers from other lenders.

Mei Dong has received past funding from the Australian Research Council.

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