Traditionally, the Australian mortgage market has been dominated by a few large domestic banks that faced limited price competition. Innovations in technology have simultaneously reduced the barriers to entry into the housing loan market, and become a necessity in order to gain and maintain comparative advantages in a market that is now highly competitive.

The rapid increase of broker originated home loans, and the successful progress of smaller non-bank lenders and large international competitors is related to their effective use of technology to avoid the need for operating expensive branch networks. As such these competitors focus on distribution through low costs channels such as the Internet, and tailoring their products to specific niche markets.

In response, the late 1990's saw the branch reduction and labour shedding tactics of the major banks. However, due to the subsequent success of the broker mortgage industry, banks have now begun to reinvest in their branch networks in an attempt to reclaim lost distribution by providing face-to-face services and relying on back-end technology systems to provide cost-savings.

Several lenders use proprietary technology systems for faster, more efficient loan processing. Having the right technology is considered a prerequisite to properly understanding and managing lending risks. Powerful information technology tools have been developed specifically for the mortgage industry, such as credit assessment programs for faster loan consideration and approval.

The introduction of such technologies and the diversification and rapid growth that has ensued within the mortgage industry has resulted in the need for stronger regulatory oversight. In 2004, the NSW Office of Fair Trading released a discussion document outlining possible regulatory approaches to the mortgage industry. Final decisions on these regulations are yet to be decided; however the establishment of market entry criteria and open disclosure of commissions are likely to be covered.