Emerging non-bank lenders & Market feedback
The Emergence of Non-Bank Lenders:
I’ve recently been accredited to another non-bank lender who has emerged with a new offering.
Being a broker, for me, is all about offering my clients different solutions. These non-bank lenders are now really becoming a viable alternative. With a 2-year fixed rate of 4.14% and lending on investment properties with 20% deposit, we have a few clients who have taken advantage of their offering.
If you are an investor and have been rejected due to not having enough equity or income, they are a real alternative option. The banks test all debt against a “test rate” which is typically over 7%, principle and interest, and scale rental income at 75%. Most investors have their investment properties on interest only, and their rental income expense is less than 25% of the rental income and needless-to-say their interest rate is likely to be under 4%. The more debt you have the worse the equation gets for investors. The non-bank lenders are much more realistic and provide a solution for some people who are ready to move on to the 2nd or 3rd investment property.
Initially their interest rates were a bit high, but with market competition they are now a real alternative.
We’ve certainly noticed an increase in lending activity since the scrapping of capital gains tax and a stronger view from the Reserve bank that rates are likely to remain low. The low rates have certainly helped first home buyers enter the market, which is awesome, and with funding available of up to 90% for first home buyers, albeit limited, it seems to be a good time to buy with property prices being a bit lower. They are still constrained by the above-7% test rate the banks use and greater scrutiny on spending. However, overall, I feel that we have a stable market.