Underwriting income—the revenue lenders earn from originating and processing loans—has become a crucial metric in the Australian finance sector. As 2025 ushers in new lending regulations and digital disruption, understanding underwriting income is more relevant than ever for borrowers, investors, and financial professionals.
What is Underwriting Income?
Underwriting income is the profit lenders generate from assessing, processing, and approving loans. It typically includes:
- Loan origination fees charged to borrowers
- Premiums earned from selling or securitising loans
- Commissions on related insurance products
- Yield spreads when loans are sold above par value
For banks, credit unions, and non-bank lenders, underwriting income helps offset the risks and operational costs of lending. In 2025, with tighter profit margins and heightened competition, underwriting income is increasingly pivotal to lender sustainability.
2025 Policy Shifts and the Impact on Underwriting Income
This year has brought several regulatory and market changes influencing how underwriting income is earned and reported:
- ASIC’s Enhanced Disclosure Rules: Lenders must now provide clearer breakdowns of all fees and commissions, making underwriting income more transparent to borrowers and investors.
- Responsible Lending Obligations: Updates to the National Consumer Credit Protection Act (NCCP) have put greater scrutiny on the affordability checks and processes underpinning loan approvals, increasing compliance costs.
- APRA’s Risk Weighting Adjustments: The Australian Prudential Regulation Authority has revised capital requirements for mortgage portfolios, indirectly impacting the profitability of underwriting activities—especially for high-LVR (loan-to-value ratio) lending.
As a result, many lenders are re-evaluating their fee structures and risk models to maintain healthy underwriting income streams.
How Lenders and Investors Are Responding
With these shifts, both traditional banks and fintechs are adapting their strategies:
- Digital Lenders: Neobanks and online lenders are leveraging automation to reduce origination costs, keeping underwriting income robust despite lower fees.
- Bundled Products: Some lenders are cross-selling insurance and other financial products at the point of underwriting, diversifying income sources.
- Loan Securitisation: By packaging and selling loans to institutional investors, lenders can realise underwriting gains upfront, although this exposes them to market volatility.
For example, in Q1 2025, several ASX-listed non-bank lenders reported underwriting income growth of 8–12% year-on-year, citing efficiency gains and new product lines as key drivers.
What Borrowers Need to Know
For Australians seeking home loans, business finance, or personal credit, the focus on underwriting income means:
- More Transparent Fees: Expect clearer disclosure of upfront and ongoing costs.
- Stricter Application Processes: Lenders are under pressure to document affordability and responsible lending, potentially lengthening approval times.
- Greater Product Choice: Increased competition may translate to more options and innovative loan features, but comparing true costs is vital.
The Bottom Line: Why Underwriting Income Matters in 2025
Underwriting income is far more than a line item on a lender’s balance sheet. In 2025, it’s a bellwether for sector health, regulatory adaptation, and the evolving relationship between lenders and Australian consumers. By understanding how underwriting income works—and how it’s changing—borrowers and investors can make smarter decisions in a rapidly shifting financial landscape.
