Insurance Broker Practices in Apartment Sector Under Scrutiny: What It Means for Unit Mortgage Borrowers

The Australian apartment sector is facing a fresh wave of regulatory scrutiny after a major referral was made to the Australian Competition and Consumer Commission (ACCC) over alleged misconduct by insurance brokers operating in strata schemes. For mortgage borrowers, this is not a distant regulatory spat — it directly threatens affordability, loan serviceability, and even the viability of unit purchases. Rising strata insurance premiums, driven by opaque broker practices, are pushing monthly holding costs higher, reducing borrowing capacity for existing and aspiring unit owners. When lenders assess a borrower's ability to repay, they factor in all property-related outgoings, including strata levies, which have surged by as much as 30 percent in some high-risk buildings over the past year. If insurance costs are artificially inflated due to broker conflicts of interest, borrowers may find themselves locked out of the market or forced into higher-risk loan products.

The ACCC Referral: What Happened and Why It Matters

The referral, reported by the Australian Financial Review on 11 July 2026, stems from an investigation by the Australian Securities and Investments Commission (ASIC) and the Australian Prudential Regulation Authority (APRA) into the practices of insurance brokers servicing the apartment sector. The core allegation is that some brokers have been receiving undisclosed commissions or volume-based incentives from insurers, leading to inflated premiums for strata schemes. These costs are then passed directly to unit owners through higher strata levies.

According to data from the Strata Community Association, the average strata insurance premium for a standard apartment building in Sydney has risen from $1,200 per unit in 2022 to approximately $1,850 in mid-2026 — a 54 percent increase. While part of this reflects genuine risk factors such as climate change and building defects, industry whistleblowers claim that broker-led price inflation accounts for up to 20 percent of the surge in some cases.

For mortgage borrowers, the implications are twofold. First, higher strata levies reduce a borrower's net disposable income, which directly impacts the loan serviceability calculations used by lenders under responsible lending obligations. Second, lenders are increasingly wary of apartments in buildings with high insurance costs, viewing them as higher-risk assets. Some major banks, including Commonwealth Bank and Westpac, have already tightened loan-to-value ratios (LVRs) on units in buildings with annual strata levies exceeding $8,000 per unit.

The ACCC referral signals that regulators are now taking a hard look at the entire insurance-brokerage ecosystem in the apartment sector. If the watchdog finds evidence of anti-competitive conduct or misleading practices, it could lead to significant reforms — including mandatory disclosure of broker commissions, caps on insurance premium markups, or even a referral to the Treasury for legislative changes.

How Strata Insurance Costs Are Reshaping Mortgage Affordability

To understand the scale of the problem, consider the numbers. A typical two-bedroom apartment in Melbourne's inner suburbs might carry annual strata levies of $6,000 to $9,000, of which insurance constitutes roughly 30 to 40 percent. When insurance premiums rise by 20 percent due to broker-driven inflation, that adds $360 to $720 per year to a unit owner's costs. For a borrower with a $600,000 mortgage at a variable rate of 6.5 percent, this extra cost effectively reduces their borrowing capacity by approximately $8,000 to $15,000 — a meaningful reduction in a market where every dollar counts.

Lenders use a "stress test" when assessing loan applications, typically applying an interest rate buffer of 3 percentage points above the current rate. This means that for a borrower at 6.5 percent, the lender assesses their ability to repay at 9.5 percent. Higher strata costs reduce the borrower's surplus income, potentially pushing them below the lender's serviceability threshold. Data from the Australian Prudential Regulation Authority shows that the proportion of new mortgage approvals for apartment purchases fell from 28 percent in 2020 to 22 percent in the first quarter of 2026, with rising strata costs cited as a key contributing factor in lender feedback.

The problem is particularly acute for first-home buyers, who are more likely to target apartments as an entry point into the market. According to a 2025 survey by the Real Estate Institute of Australia, 42 percent of first-home buyers cited "unexpectedly high strata costs" as a major barrier to purchasing a unit. This is not just about insurance — it includes building maintenance, sinking funds, and administrative fees — but insurance is the fastest-growing component.

For existing mortgage holders, the impact is equally concerning. As strata levies rise, borrowers may find their debt-to-income ratio creeping higher, potentially triggering loan renegotiations or even mortgage stress. A 2026 report by Digital Finance Analytics found that 18 percent of apartment owners with mortgages are now in "severe mortgage stress," defined as spending more than 45 percent of pre-tax income on mortgage repayments and strata costs combined — up from 12 percent in 2023.

What Borrowers Can Do: Navigating a Tightening Market

Given the regulatory uncertainty and rising costs, borrowers considering apartment purchases need to be proactive. The first step is to request a detailed breakdown of strata levies from the vendor or body corporate before making an offer. This should include the insurance premium component, the insurer name, and any broker fees disclosed. If the broker is unnamed or the commission structure is unclear, that is a red flag.

Second, borrowers should factor in a buffer for future strata cost increases when calculating their borrowing capacity. A reasonable assumption is that strata levies will rise by 5 to 10 percent annually over the next three years, given current trends in insurance and building maintenance. Lenders do not always do this automatically, so borrowers should present their own calculations to the lender to demonstrate conservative financial planning.

Third, consider properties in buildings that have a track record of stable strata costs. Buildings with fewer than 20 units, older buildings with established sinking funds, and those located in low-risk areas (e.g., not flood-prone or bushfire-prone zones) tend to have more predictable insurance premiums. Data from CoreLogic shows that apartments in buildings with an active owners' corporation that holds annual general meetings and publishes financial statements have strata costs that are, on average, 15 percent lower than those in poorly managed schemes.

For those already holding an apartment mortgage, refinancing may be an option — but it is becoming harder. Lenders are now scrutinising strata insurance documents more closely during the refinancing process. A 2026 report by the Australian Banking Association noted that 12 percent of apartment refinance applications were rejected or delayed due to concerns about "excessive strata costs" in the first half of 2026.

At Arrivau, mortgage brokers can help borrowers navigate these complexities by comparing lender policies on strata costs and identifying products that are more accommodating to unit owners. For instance, some non-bank lenders and credit unions are more flexible on serviceability thresholds for apartments, provided the borrower can demonstrate stable income and a strong deposit.

The Regulatory Road Ahead: Potential Reforms and Market Impact

The ACCC referral is not an isolated event — it is part of a broader push to clean up the strata insurance market. In June 2026, the New South Wales government announced a review of strata insurance regulations, following similar moves in Victoria and Queensland. The key issues under examination include:

1、Mandatory disclosure of all broker commissions and incentives. 2、A cap on insurance premium markups for strata schemes, similar to the "fair value" rules already applied to general insurance products. 3、A requirement for strata schemes to obtain at least three quotes from different insurers before renewing a policy, with the quotes to be made available to all unit owners.

If these reforms are implemented, they could lead to a 10 to 15 percent reduction in strata insurance premiums over the next two years, according to estimates from the Actuaries Institute. That would translate into savings of $300 to $600 per year for the average unit owner — enough to improve mortgage serviceability for thousands of borrowers.

However, there are risks. Some insurers may respond to tighter regulation by exiting the strata market altogether, particularly in high-risk areas such as northern Queensland or bushfire-prone regions. This could reduce competition and drive premiums higher in the short term. The Australian Competition and Consumer Commission's role will be critical in ensuring that any market adjustments are transparent and fair.

For mortgage borrowers, the key takeaway is that the apartment sector is undergoing a structural shift. Rising strata costs — driven partly by insurance broker practices — are no longer a minor consideration but a central factor in loan affordability. Staying informed about regulatory developments and working with a knowledgeable mortgage broker can make the difference between a successful purchase and a financial strain.

FAQ

Q: How do strata insurance costs affect my mortgage application?

A: Lenders assess your ability to repay a loan by considering all your living expenses, including strata levies. Higher insurance costs increase your strata levies, which reduces your disposable income and can lower the amount you are eligible to borrow. Some lenders also apply a higher risk rating to apartments with high insurance premiums, potentially requiring a larger deposit or offering a higher interest rate.

Q: Can I negotiate strata insurance premiums as a unit owner?

A: As an individual unit owner, you cannot directly negotiate the building's insurance policy — that is the responsibility of the owners' corporation or body corporate. However, you can attend annual general meetings, ask for transparency on insurance costs, and advocate for the committee to obtain multiple quotes from different insurers. If you suspect broker misconduct, you can report it to ASIC or the ACCC.

Q: What should I look for in a strata insurance document before buying a unit?

A: Request the most recent strata insurance certificate, which should show the premium amount, the insurer name, the broker name (if any), and the policy's excess. Look for any "broker fees" or "commission" line items. If the premium seems high compared to similar buildings in the area, ask the vendor or agent for an explanation. You can also check the building's claims history, as frequent claims can drive up premiums.

Q: Will regulatory action reduce my strata costs?

A: If the ACCC finds evidence of anti-competitive conduct, it could lead to fines, mandatory disclosure rules, or even price caps. These measures could reduce premiums over time, but the impact will vary by building and location. In the short term, you may not see immediate relief, but the regulatory scrutiny is likely to make brokers more cautious about excessive markups.

Q: Are there any lenders that are more lenient on high strata costs?

A: Yes, some non-bank lenders and credit unions have more flexible serviceability criteria for apartments. For example, loans.com.au and Bank Australia have been known to accept higher strata cost ratios if the borrower has a strong deposit and stable income. It is advisable to work with a mortgage broker who can match you with lenders that have a track record of approving unit loans in high-cost strata schemes.

Sources and further reading

1、Australian Financial Review. "Insurance brokers in apartment sector reported to watchdog." 11 July 2026. 2、Strata Community Association. "2026 Strata Insurance Cost Report." June 2026. 3、Australian Prudential Regulation Authority. "Quarterly Authorised Deposit-taking Institution Statistics, Q1 2026." May 2026. 4、Digital Finance Analytics. "Mortgage Stress and Affordability Report, June 2026." July 2026. 5、CoreLogic. "Apartment Market Insights: Strata Costs and Property Performance." June 2026. 6、Australian Banking Association. "Refinancing in a Rising Cost Environment." July 2026. 7、Actuaries Institute. "The Impact of Insurance Regulation on Strata Premiums." May 2026. 8、Real Estate Institute of Australia. "First Home Buyer Survey 2025." January 2026. 9、Arrivau. "How to compare mortgage rates for apartment purchases." /rates/ 10、Arrivau. "Understanding strata costs in your mortgage application." /mortgage-guides/ 11、Arrivau. "Refinancing your unit loan in 2026: A step-by-step guide." /mortgage-guides/