One of the major banks discounted variable rates has returned to 5%, it is just the matter of time that others will follow the suit. To make thing worse, APRA is becoming more strictly towards them in regard to the loan with investment purpose and interest only type. Under this pressure, major lenders are getting increasingly picky to mortgage applicants, repeatedly check the income supporting document, less tolerant to clients who have credit defaults and more conservative to value to newly built security properties.
Though it might be too early to state the glory time of major lenders is over, it is the time to consider about non-bank lenders now.
Who are non-bank lenders?
A non-bank lender is an institution other than a bank, credit union or building society that is offering limited but basic and fully featured loan products. As a privately owned financial institution, a non-bank lender has more flexibility in the rates and fees. Most non-bank lenders get their fund from banks themselves, and they try to minimise costs and lower their overheads, therefore, they are in a position where they can try to beat the banks.
Are they trustworthy?
The Australian Securities and Investment Commission sets regulations requiring all lenders including the non-bank lenders to openly disclose any fees or rates associated with their products, while the Australian Prudential Regulatory Authority (APRA) only overseas banks to ensure that they hold to financial promises made to consumers. Only the extreme financial circumstances like 2008 GFC may cause some Australian non-bank lenders to shut down and even change the ownership, while the new owner cannot force consumers to pay the loan balance in full, the consumers’ obligation would be to continue making repayments as normal, and the terms of consumers’ original contract will remain in effect.
What are the advantages of non-bank lenders products and services?
- Competitive rate and lower fees: in general, non-bank lenders get wholesale fund from banks, so the rate and fees can beat banks themselves providing the mortgage applicants are able to provide simple and straightforward supporting documents and information;
- Tailor made product types: outside of APRA regulation, some non-bank lenders can still offer product types such as high LVR loan with interest only repayment, high LVR loan without need to demonstrate genuine saving and so forth;
- Flexible in credit defaults: many non-bank lenders can offer transitional home loan products for the applicants who have different level of credit issues, after the certain period of time, change back to normal home loan products without penalty breaking or discharge costs;
- Friendly towards self-employed applicants: some non-bank lenders allow short term ABN registration and business turnover, these applicants will no longer need to wait until 24 months of the period but get a specialised loan approved and enjoy the benefit of property capital gain.
Although non-bank lenders are still not recognised by the mainstream market especially the Asian community, it might because of the lack of understanding of how they operate an online service and less sense of security. It is the time to learn about these lenders, and you will be impressed by their comprehensive loan features and services.
If you need to understand more, please consult with our professional lending specialists on 1300 880 123 or search rate online.