In a changing environment, brokers need non-bank lenders more than ever, writes the director of ComDirect, John Dickinson
While i'm sure the banks would love to control everything and write – or lately not write – every loan, the fact is that now more than ever brokers need non-bank lenders. People are not square, most people anyway, and many find it impossible to fit into those tight little banking boxes.
Over the last 12 months these boxes have been getting smaller, and fewer and fewer people are able to squeeze themselves into them, no matter how hard they breathe in.
This has left many borrowers and brokers at a loose end and looking for options. The hard fact is that the good old days are over, and non-bank lenders have never been more relevant than they are now.
The reason for this is that while our banking friends are often stuck with inflexible rules-based credit guidelines, non-bank lenders can assess each application on its merits and make sensible and, importantly, relevant decisions that can often lead to an approval rather than a decline – often after the broker has already spent weeks or sometimes even months jumping through the bank’s fiery hoops.
The hard fact is that the good old days are over, and non-bank lenders have never been more relevant than they are now
Due to the retraction of mainstream credit and, dare I say, the often-arrogant attitude of the banks, it has never been more important for brokers to align themselves with reputable non-bank and private mortgage providers, as by doing so they will not only be in a position to help more clients but also to generate additional income.
Despite what some would say, our economy is not in great shape. The recent drop in interest rates is proof of this.
While property values have seemed to stabilise, at least for now, the fact is that the biggest driver of housing prices is mortgage availability, and while mainstream credit remains tight, it’s unlikely that real estate values will improve greatly for some time.
In fact, this could be a best-case scenario, as all bets are off if there is a significant international event or the regulatory bodies continue to turn the credit screws.
I think we would all agree that it’s good that the election is behind us, but don’t make the mistake of thinking all is good in the world once again.
The truth is that Australia’s property is still some of the most unaffordable in the world. We pay some of the highest utility prices globally; we have historically high household debt levels; and despite the political spin, wage growth is slow or non-existent.
The banks are aware of this fact, and while there has been some relaxing of interest rate stress testing, this is seemingly negated by increased household expenditure measures, so mainstream credit remains as restrictive as ever and most likely will remain this way for some time.
Due to this fact, I believe that the more options people have with regard to finance the better. If money makes the world go round, then we’d better keep money revolving, as just like the earth, if we stop spinning it will rock us to our core.
Investor-based private mortgages can also be an option worth considering in the current market. This is due to the fact that property investors are able to rely heavily on the asset being offered as security and can apply their own credit due diligence. For the borrower this often means only having to satisfy relevant requirements and not having to navigate through the ofteninsurmountable and nonsensical demands of a bank.
I encourage brokers to reach out and connect with a wide variety of credit providers, such as non-bank and private mortgage lenders.
Your clients are looking to you to fi nd a solution, and the more options you have in the current market the better.
John Dickinson is the director of ComDirect, a lending mortgage company specialising in arranging private commercial mortgages. He was previously the director of a debt mediation company focused on helping people regain financial control through the reduction and elimination of their debts.