ACCC’s Rod Sims raises red flags over AFG purchase of Connective

The competition regulator has raised preliminary concerns over AFG’s mooted acquisition of Connective.

Together, AFG and Connective account for almost 40 per cent of mortgage brokers in the country.

The competition regulator has flagged concerns over Australian Finance Group’s proposed acquisition of Connective, saying it could inhibit new entrants and competition in an “already concentrated” mortgage aggregator market.

The Australian Competition and Consumer Commission’s preliminary comments on the deal noted it would create the largest mortgage aggregator in Australia “by a significant margin”.

A merged group would account for almost 40 per cent of mortgage brokers in the country, with a combined 6575 brokers, more than National Australia Bank.

It would make annual residential loan settlements of around $76bn.

More than half of Australia’s home loans are initiated through brokers, ACCC chairman Rod Sims said.

“AFG and Connective operate in an already concentrated market, and not many other mortgage aggregators offer a similar level or type of service. Additionally, potential entrants or small players may be deterred from expanding by various barriers, including compliance costs,” Mr Sims said.

“The ACCC is concerned there will be limited similar alternatives for brokers to switch to. This may negatively impact the services offered to brokers.”

The deal requires the ACCC’s approval for the merger to go ahead. The final decision will be announced on May 7.