Why non-bank lenders are rising in popularity in 2022

December 7, 2022

There’s no denying that Australia’s property market is shifting and is expected to soften over the months to come. However, we can’t forget about the unprecedented growth we’ve seen in prices over the past 12 months. In 2021 alone, housing values jumped 22.1% with affordability a major concern for buyers across the country.

At the same time, lending conditions for traditional banks have tightened and made it tougher for borrowers to access the loan amounts they need. In late 2021, APRA (the Australian Prudential Regulation Authority) raised the minimum interest rate buffer on new loans from 2.5% to 3%, essentially reducing the borrowing capacity for buyers by around 5%. 

While property price growth might be easing in 2022, interest rates have risen and are predicted to continue rising in the months and years to come. That’s why more borrowers are looking elsewhere and seeking out a new breed of non-bank lenders who offer more flexible lending criteria while still meeting lending regulations. 

With faster approval times, specialised loan products and more customised solutions, non-bank lenders are rising in popularity for borrowers across Australia. Let’s explore how non-bank lending is disrupting property finance and the opportunities it offers homeowners and buyers. 

What is a non-bank lender?

In a nutshell, non-bank lenders offer a new way of accessing property finance. As the name suggests, these lenders are not associated with big banks or traditional banking institutions and offer much more flexible lending criteria. The other big difference is that non-bank lenders aren’t able to take deposits from borrowers. 

Although they are not associated with traditional institutions, non-bank lenders still have to abide by the regulations set out in the Consumer Credit Code, need a credit license to operate and are governed by responsible lending regulations under ASIC. 

Essentially, non-bank lenders operate under a credit license, not a banking license, meaning they’re safe, secure and well-regulated. 

What trends are we seeing in non-bank lending in Australia?

Off the back of the Banking Royal Commission, trust in traditional banking institutions has been at an all-time low. A recent survey of Australian banking customers found that 94% agree banks don’t act in their best interests.

This lack of trust and tighter lending regulations have prompted borrowers to consider alternate ways of accessing property finance. Not only do non-bank lenders have the ability to provide faster approval but they harness tech to make it easier to submit an application. 

Stats from the RBA show that since 2016, the number of non-bank housing loans has grown by over 10% year on year. With new tech entering the market and specialised lenders offering targeted products that solve specific problems, more customers are considering non-bank lenders as a viable home loan option. 

As lending criteria continue to tighten among big banks, more borrowers are likely to take advantage of the modern, tech-driven products offered by non-bank lenders.

Why are customers embracing non-bank lenders in Australia?

It’s not hard to see why borrowers are growing tired of slow, traditional banks and switching to forward-thinking non-bank lenders. 

Traditional banks and lenders tend to have a very narrow definition of who is a ‘good borrower’. That usually means having a good credit history, no bad debt, and a history of stable full-time employment. 

However, we know that over 10% of Australia’s workforce is currently self-employed, plus over 3.9 million Australians are retired and not receiving a current source of income. Just because these borrowers don’t fit the typical criteria of a borrower doesn’t mean they can't qualify for a home loan. 

Rather than accepting the high-interest rates charged by banks, these non-traditional borrowers are looking elsewhere to non-bank lenders who specialise in loans that fit their needs. 

Some of the other key reasons why customers are switching to non-bank lenders include:

  • They’re craving faster, smooth customer experiences: modern borrowers don’t want to spend their free time traveling to bank branches or spending hours on hold. Instead, many non-bank lenders offer easy, digital application processes and secure digital signing technology that gets them moving faster.

  • They prefer to submit their applications online: printing and scanning documents can slow you down as a borrower. But, many non-bank lenders allow you to complete an online application and submit it in minutes to get your loan approved sooner.

  • They want to work with a lender that’s built for today: the narrow lending conditions of big banks don’t work for many borrowers. Instead, non-bank lenders offer greater flexibility and specialised loan products that are built for modern borrowers. 

At Bridgit,  we’re a non-bank lender that focuses on digital bridging loans. We help Aussie homeowners buy now and sell later with flexible loans that take the stress out of securing bridging finance. 

Our online application process helps eligible homeowners secure loan same-day loan approval, without picking up a pen or printing anything. We’re passionate about giving homeowners the opportunity to move on the best opportunities and buy on their own terms, without paying two mortgages at once.

Ready to get started? Apply for a Bridging bridging loan now. 

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