A national mortgage aggregator is set to become a major player, especially in vehicle finance, following a recent announcement from the Australian Competition & Consumer Commission (ACCC).
The ACCC will not oppose a major acquisition between two prominent finance firms.
Australian Finance Group (AFG) is ok to proceed with its proposed acquisition of Connective Group Pty Ltd.
AFG and Connective are both mortgage aggregators, which act as intermediaries between mortgage brokers and lenders, such as banks. Both businesses also provide vehicle and equipment finance services.
The ACCC considered the acquisition’s potential impact on lenders, mortgage brokers and consumers.
Brokers, according to the ACCC, 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," said ACCC Chair, Rod Sims.
"Our initial inquiries identified a number of preliminary concerns, as set out in our statement of issues in February.
“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," he said.
While the ACCC found that AFG and Connective compete closely with one another, other established aggregators, including Finsure and the aggregators owned by the 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," said Sims. "Lenders will likewise have a range of aggregators through which they can access potential consumers."
The combined AFG-Connective is likely to have the incentive to retain lenders on their panel who 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,” said Sims.