Non-bank lenders take bigger slice of loan market
More New Zealanders are turning to non-bank lenders for their home loans. Reserve Bank data shows nonbank financial institutions increased their lending on houses by $530 million, or 27 per cent, to a total of $2.5 billion in the year to August.
Over the past two years, they increased their home lending by 62 per cent.
It is still only about 2 per cent of the total home loan market but brokers, lenders and other commentators say non-bank lenders could be expected to become much more dominant as time goes on. They play a much bigger role in the Australian market, with about 8 per cent of all lending.
Over the past year, New Zealand banks have been stricter about their lending criteria, although there are now signs some flexibility is returning.
There was $5.4b in home loan lending in August, compared to $6.1b in August 2016.
Non-bank lenders are not bound by the loan-to-value restrictions that limit mortgage lending to borrowers with small deposits, although borrowers will usually be able to access better rates if they have more equity in a deal.
Adrienne Church, general manager at non-bank lender Resimac, said it was a busy segment of the market. ‘‘I don’t think that’s going to change any time soon, for a range of reasons.’’ cent One year – 4.86 per cent 7.5 per cent to 8.5 per
5.2 per cent
She said the Australian Royal Commission of Inquiry into Misconduct in the Banking, Superannuation and Financial Services Industry had led the banks on the other side of the Tasman to change some of their policies and procedures, and some of this was flowing through to New Zealand.
One of the key new differences, also prompted by New Zealand’s own responsible lending rules, was the way they assessed a borrower’s ability to service a mortgage.
She said banks were now looking at customers’ actual outgoings to determine whether they could make repayments, as opposed to applying a standard metric.
‘‘That’s something we’ve been criticised for in the past, that it’s too hard to go through the bank statements ... but it’s what we should be doing. This brings us on to a level playing field so we can compete.’’
She said borrowers were now more prepared to look at non-bank lenders.
Mortgage broker John Bolton, founder of Squirrel, said non-bank lenders now received 10 per cent of the lending his business placed, up from less than 5 per cent three years ago.
It was a good option for smallscale developers and builders who did not have a strong enough reputation to borrow from a bank, he said, or self-employed people who did not have a solid financial history.
‘‘Maybe they’ve had a bad year and they’ve had to restructure their business. Non-bank lenders look at the cash flow, not the financials, and if the business is in good shape, they’ll still do it.’’
Warren Mayall, managing director at Basecorp, launched a long-term mortgage product twoand-a-half years ago, noting increasing demand.
He said some borrowers would opt to switch back to a mainstream lender once they were eligible for a bank loan. ‘‘They can take the loan for 30 years – although they don’t all necessarily last that long.’’
Claire Matthews, a banking specialist at Massey University, said there was room for the nonbank market to grow.
‘‘A key driver is probably the amount of lending the banks are willing to do.
‘‘Most borrowers prefer bank loans if they can get them, so nonbanks are limited in their opportunities to lend if banks are doing the lending.’’
Resimac: Basecorp:
NZCU Baywide: