ACCC approves AFG’s acquisition of rival mortgage group Connective

ACCC Chair Rod Sims. Picture: Zak Simmonds

The ACCC has approved AFG’s $120m acquisition of rival mortgage aggregator Connective, creating a firm with $76bn in mortgage settlements and servicing 6575 brokers.

The broking community was split on the deal, with some preferring the two to compete for business and others believing the bigger firm will get better deals from the banks.

Mortgage brokers account for around 56 per cent of all home loan mortgages.

In a statement, the competition watchdog said it had “considered the acquisition’s potential impact on lenders, mortgage brokers and consumers. Brokers play an important role for many consumers seeking a mortgage, and their services also allow individual lenders to access a wider group of potential consumers.”

“The proposed acquisition will create the largest mortgage aggregator in Australia. Our initial inquiries identified a number of preliminary concerns, as set out in our statement of issues in February,” ACCC Chair Rod Sims said.

“We have now completed a second round of inquiries. After our extensive public review of the acquisition and our consultation with a wide range of interested parties, we believe the combined AFG-Connective is likely to continue to face robust competition.”

While the ACCC found that AFG and Connective compete closely against one another, other established aggregators, including Finsure and the aggregators owned by National Australia Bank, are likely to continue to provide strong competition.

“Mortgage brokers will still have a range of other aggregators, should they become dissatisfied with the combined AFG-Connective’s pricing or service. Lenders will likewise have a range of aggregators through which they can access potential consumers,” Mr Sims said.

The combined AFG-Connective is likely to have the incentive to retain on their panel lenders that are popular with consumers. More generally, aggregators have an incentive to maintain a broad and diverse panel of lenders to attract brokers.

“Ultimately we found that a substantial lessening of competition was not likely,” Mr Sims said

As mortgage aggregators, AFG and Connective provide brokers with access to a panel of lenders, and provide panel lenders access to affiliated brokers to distribute mortgages. Generally, a broker will be affiliated with one mortgage aggregator at a time, while lenders tend to sit on a number of mortgage aggregator panels.

AFG and Connective also offer brokers various support services to assist them to run their businesses. This includes customer relationship management software that provides brokers with the ability to compare products from the lender panel and assist in the lodgement of loan applications.

AFG and Connective also offer white-label or own-branded mortgage products under their respective brands. These products are mostly funded by third party lenders, however, AFG also offers loan products that are self-funded