First Rate Mortgages

Bank Said No - NonBank Lending

Non Bank lending on the rise as non bank lender increases market share

Non Bank lending is being looked at with more interest by the first home buyers, self employed and bad credit rating applications as banks continue to tighten their criteria – making it tougher for first home buyers and self employed investors.

The restrictions imposed by the main stream banks has highlighted that seeking the support of Non Bank lenders has become an effective step towards securing a mortgage and owning your home.

One of the Non Bank lenders we use at First Rate Mortgages has advised that there was an increase of 80% in applications from self employed people in the three months to June, all of whom had been unable to secure a mortgage from a traditional bank lender. Has your Bank said NO!?

At First Rate Mortgages we are continually developing our process and policies and updating our knowledge and qualifications to ensure that we are in a position to continue to offer good quality advice to our clients during this important financial time.

Rob Stock 17/12/2019 stuff

NZ banks say ‘no’ more often, driving customers to non-bank lenders

Banks saying ‘no’ more often to would-be borrowers has driven massive growth in the non-bank lending sector, says KPMG in its survey of non-bank lenders.

Record demand for loans, and a surplus of funding from investors looking for a decent return, saw the non-bank lending industry post 9.32 per cent growth in 12 months to the end of June, said John Kensington, head of banking and finance at KPMG.

The biggest area of growth was non-bank mortgages, but there was also continued growth in non-bank personal loans.

“This appears to be driven by both a continued tighter banking ‘black box’ as well as flat house prices, restricting people’s ability to put their new lending ‘on the mortgage’,” Kensington said.

Non-bank lenders had taken advantage of banks becoming more risk averse as they adjusted to the “new normal” for conduct and culture, following the Australian royal commission into banking misconduct, and as a result of the Reserve Bank’s push to get banks to hold more capital.

Banks’ reluctance to lend to some people was leading in a rise in would-be borrowers seeking out an “other significant financier” to help them fund their spending, said Kensington.

The non-bank lending industry was also benefiting from low levels of bad debts thanks to a strong economy and the lowest unemployment for 11 years.

Lower interest rates had increased people’s ability to service higher levels of debt, but flatter house prices was probably dampening some people’s willingness to borrow to spend.

“For home owners it is likely concerning that the value of their property could decrease, which could also be aiding the feelings of economic uncertainty and hesitation to spend,” Kensington said.

Also contributing to the rapid growth of non-bank lending was the rise of buy now, pay later (BNPL) finance, which let people make consumer purchases by incurring debts they repaid in set instalments.

BNPL financiers like Afterpay did not charge interest, but there were penalty fees for debtors who miss payments.

The rise of BNPL finance was partly the result of the rise of “generation now”, Kensington said.

Good Returns 30th September 2020 

Non-bank lending soars

Non-banks report record growth in New Zealand as retail banks maintain tight credit restrictions in the economic downturn. 

Bank restrictions have led to a flow of prime customers to non-bank lenders, which are offering lower rates than ever. 

Resimac’s head of New Zealand Luke Jackson said the company “was perfectly placed to service the market”, and had grown its book by nearly 30%. 

“We haven’t had to slow down on lending volume or make any changes to credit policies this year,” he said. “On an annualised basis, we’re running close to a 30% book growth, and we announced earlier this month that we’ve had a record number of settlements over the last six months.”

“With banks being obligated to raise capital buffers, they’re continuing to focus on simple, low-risk transactions,” Jackson added. “Advisers have realised that in order to get transactions happening, they need to use a wider range of funders, and thus they’re submitting more deals to non-banks. Any clients that need a bit of pragmatic thinking, or who don’t fit the automatic decision box of banks, are coming to non-banks.”

Michelle Sargeant, national sales manager at Pepper Money, said her company had originated more than $100 million in loans in its first year in NZ.

“Non-bank lending has remained buoyant throughout this period because brokers are more aware of the innovative features that non bank lending provides to their customers, and are benefiting from the newer technologies non bank lenders like Pepper Money deliver,” Sargeant said. 

Stephen Massey of Avanti said the past two months were “two of our biggest ever” for settlements: “Avanti Finance has certainly seen some of our highest levels of applications and new business over the last three months,” he added.

Massey said banks conservative behaviour, and turnaround time struggle, play into the non-bank sector’s hands.