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While the lending group has pulled back on home lending through the broker channel amid a cost-cutting exercise, it will soon pilot a digital mortgage through the broker channel.
Non-major banking group Bank of Queensland Limited (BOQ) has said that it is focusing its efforts on testing a digital mortgage product, including through the broker channel, as the banking group undergoes a transformation and cost reduction program.
On Wednesday (16 April), the banking group released its financial results for the first half of the financial year 2025 (ending 28 February 2025), revealing that it continues to “focus on transformation and interim return over growth”, as its works to deliver a “scalable, low-cost-to-serve digital bank”.
Over 1H25, the bank had focused on scaling its digital banking platform and prioritising its proprietary channel and ME Bank channels as it continued to work to moderate home lending volumes as capital was deployed to higher-returning business lending.
As part of this move, BOQ ‘paused’ new home loan originations through the broker channel in August (following a similar move by its subsidiary brand Virgin Money, which stopped accepting home loan applications through the broker channel on 1 September 2023) and drew ire from the broking industry after failing to pass on the first rate cut in four years in February.
As such, home lending contracted at the banking group over the half by 1.2 billion. Only ME Bank grew its volumes over the half – up $752 million – but not enough to counter the losses in the other group arms (BOQ home loans were down $1.4 billion and Virgin Money mortgage growth was down $564 million).
BOQ Broker originated just 200 loans in 1H25 (down from 2,500 in 1H24), while BOQ proprietary wrote 3,200 loans (down from 4,600 loans).
BOQ Specialist volumes – which are still writing specialist home loans and business loans from the broker channel – saw volumes drop from 1,000 loans to 600 loans.
ME Bank continues to dominate the group’s home loan flows – with 10,300 home loan applications written in 1H25 – although this was also slightly down on the 10,500 written in 1H24.
Its gross home loan book shrank to $60.3 billion (down from $62.3 billion in 1H24). The group anticipates that FY25 will be the peak of its mortgage book contraction.
Brokers to expect digital mortgage pilot ‘in coming months’
However, the group is now working to push growth through its converted proprietary channel (converting franchises into corporate branches) and “omnichannel” digital mortgages – on a new cloud digital banking platform – which it said will deliver returns above its cost of capital (at current rates).
According to the banking group, the digital mortgage is around 50 per cent cheaper to originate.
The digital mortgage launched with staff, family, and friends in 2H24. The completed pilot reportedly saw time to yes drop from 20 days to around one day (with same-day approvals for simple refinances) and reduced the hand-offs from 18 touchpoints to three (or four for more complex loans requiring higher credit delegation).
This is largely due to the faster cloud platform technology, a reduction in missing information requests due to the change in process, and changing the approval process from lending support and assessment teams to go straight through to verification officers and settlement officers.
It will now start to phase the growth of the digital mortgage for all brands.
The bank hopes that the multibrand, multichannel solution will return the bank to growth more quickly. This will be done by providing digitised processing, automated digital communication, real-time notifications, digital contracts and electronic signatures, a “seamless” customer origination offering (including self-service loan variations) and improved analytics and reporting, as well as simplifying the product offering down to two products (from around 100).
Speaking to The Adviser, BOQ Group’s general manager, broker and strategic partnerships, Johnny Lockwood, said: “BOQ Group has delivered a digital mortgage solution tailored for the broker channel and will commence a gradual rollout to brokers in the coming months.
“While the focus for the new digital mortgage is currently on transitioning the ME brand, BOQ Group has also built the BOQ and Virgin Money brands on the new platform and will continue to assess internal and external conditions with regards to how these brands may be available for new customers in the retail broker channel.”
Noting the ‘pause’ on BOQ home loans for brokers, Lockwood said: “Existing customers on the BOQ branded product in the broker channel continue to be serviced, including with new lending, via our heritage platform.
“Lending composition and policy has been expanded on the ME brand to account for the pause in the other retail brands, and is currently meeting the bank’s balance sheet objectives.”
Digital personal loans for all brands are expected to start on the new digital bank platform from FY26.
Speaking about the digital transformation of the banking group, BOQ’s managing director & CEO Patrick Allaway said: “We are making considerable progress transforming to a simpler, specialist bank with a superior customer experience through our digital platform and improved shareholder returns.
“These results demonstrate another half of disciplined execution against our strategy, delivering on market commitments.
“Our improved performance and stable margin in the current operating environment validate our strategy to shift our portfolio towards higher-returning segments, and reposition the Retail Bank as a scalable, low-cost-to-serve digital bank.
“The Group has navigated some real challenges and is taking decisive action to enhance customer experience and improve the performance of BOQ for the benefit of our people, customers and shareholders.
“It is pleasing to see that the benefits from these bold decisions to simplify the business and execute our strategy are delivering positive outcomes, while recognising there is still more to do.”
[Related: BOQ ‘pauses’ broker channel for home loans]
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