Why switch to a non-bank?

2016 could well be the most pivotal year for Australian mortgage lending since the GFC. The non-bank sector has recovered over the past eight years, but mostly by focusing on niche clients and specialist types of lending. Mounting a serious challenge to the majors in prime and investor lending has simply not been a realistic strategy.

This is the year that could change. With APRA pushing banks to limit the growth of investor lending, the banks responded in July with out-of-cycle interest rate rises and tougher serviceability requirements for investors. In October, the raising of capital requirements for major banks resulted in owner-occupiers suffering similar rate hikes, including existing customers.

All this meant that the price advantages banks enjoyed over non-banks are being shrunk, while non-banks, who already excelled on personalised lending criteria, have become the fi rst point of call for frustrated investor clients. Non-banks have been presented with both a major opportunity and a difficult strategic decision – should they move beyond their profi table niches to compete in the prime and investor spaces? And is it possible to undercut the banks while practicing responsible lending?

They also need to respond to a growing threat. The rise of white label products as a compelling alternative to the banks, and the eagerness of aggregators to push these products, has got to the point where smaller non-banks can no longer assume a guaranteed place on aggregator panels. Even the bigger players will need to work harder to justify their position and distinctive product offering.

In this feature, the non-banks themselves will address all these issues, accompanied by sidebars where non-banks describe their strategy for the year ahead. So read on to make your own decisions over which lenders, products and business models work best for you and your client in the year ahead.

2016 is shaping up to be another dynamic year for the mortgage market, and we look forward to further cementing our position as Australia’s leading wholesale funder. Our strong partnerships with aggregators and mortgage managers will be a priority for us, and we will continue to offer white label options with the winning combination of competitive rates, and the security that comes with being backed by one of Australia’s biggest banks.

The lending market will continue to shift in 2016, and we predict regulatory change will continue to characterise many customer and industry conversations. This is an opportunity for brokers to position themselves as experts, and Advantedge will continue to offer support, providing comprehensive information to equip brokers with the confidence to help educate and empower customers to navigate through the changes.

White label loans are going from strength to strength, and we expect this to continue into 2016. This also presents a real opportunity for brokers in a competitive market as white label options provide a chance for the broker – not the lender – to become the face of the loan. With white label, brokers can reinforce their personal brand through the customer life cycle, driving brand awareness and brand loyalty.

We understand it is a priority for many of our business partners to focus on brand awareness in 2016, and we will be helping them do this through a consistent program of support, offered via Business Development Managers, assistance with marketing and the provision of targeted advice.

There has been something of a reshaping of the wholesale space in the past year, with some larger wholesale funders having departed. We view this as an opportunity, and will use 2016 to prove our commitment to our aggregator partners and mortgage managers. 

Brett Halliwell
general manager


MPA: Given APRA’s restrictions of lending by ADIs, how will you use this to expand market share?
Iden: I look at this as an opportunity for us to compete more favourably. With risk for rate coming into play, it is even more now about educating brokers on what you can do, as opposed to what you can’t. Lots of lending restrictions has opened the door for us, but, in the end, even securitised lending has restrictions that you have to work within. We have to step up our marketing efforts and communications, due to all the changes that have occurred in the past six months.

Pepper: The opportunity that was presented from the recent regulatory changes was a blessing in disguise for Pepper, because there were an unprecedented number of brokers looking for an alternative to the banks and non-majors. This gave us an opportunity to showcase our products, people and industry leading service to a vast number of broker that may not have utilised non-banks or specialist lenders in the past. This period really highlighted which non-banks the brokers should rely on and trust for transparency and service. Pepper held strong to its commitment to the market and continued to deliver same-day assessment and approvals, regardless of the exponential increase in lodgements.

RESIMAC: While RESIMAC is not supervised directly and indirectly by APRA, our approach has always been to consider their guidance to ADIs, to ensure we maintain a competitive, robust and balanced approach to our lending. RESIMAC has a longstanding history in the Australian residential mortgage market, and as a non-ADI and active participant in the securitisation markets, this balanced approach has allowed us to deliver a broad range of competitively priced lending solutions to the wider mortgage market. By offering a broader range of lending solutions than that of our competitors, our ability to capture market share is heightened, irrespective of the current market conditions.

Liberty Financial: It’s well known that current market regulations have resulted in an increase in investor loans for non-banks, and Liberty is no different. However, Liberty is also experiencing strong growth across the whole credit spectrum, which is why our growth of market share has increased well beyond that of our competitors. As more business partners experience not just our great rates and products, but also gain insight into our unique underwriting approach, they are looking to Liberty for solutions to help even more of their customers.


We believe the property market will, overall, cool somewhat from the high levels of growth it has experienced over the past several years. As always, there will be areas that will continue to experience growth, while other areas will remain flat or come off slightly.

Regardless of which direction the market goes, AFM’s focus will largely remain unchanged. We will continue to focus on developing innovative mortgage solutions that are backed by a strong service proposition.

We continually review our suite of products to ensure they align with the needs of the market and our customers. Brokers can expect AFM to expand its product suite over the course of the year, as already demonstrated by the recent release of our Alternate Option Construction Facility, a facility designed to assist borrowers who do not qualify for a traditional construction loan due to credit scoring issues or other past credit problems.

We have plans afoot to release new and innovative funding solutions to complement our diverse range of products, and these products will be designed to benefit our broker network and their clients.


MPA: How do you balance responsible lending with distinguishing yourselves from the banks and expanding market share?
Better Mortgage Management: BMM specialises in taking a broker’s complicated problem and fi nding the solution that fits their customer’s unique needs. We’re focused on providing brokers’ customers with the right deal. As such, we’ve naturally balanced responsible lending and differentiating ourselves from banks. In the past, banks may not have been as responsible in the lending guidelines in the period leading up to early 2015. With new regulations, they had to adjust the way they did business, for example, with serviceability or with exploring customers’ actual expenses. Whereas nonbanks, such as BMM, already had a long history of practicing responsible lending, so not much changed for us.

Pepper: Pepper incorporates responsible lending and customer-centricity in everything we do… Our credit policies and processes have been tried, tested and evolved over the 15 years we have been in business. When APRA announced the changes that affected investment lending in 2015 we did not change our business strategy or marketing message. It was BAU for Pepper. I don’t believe that any lender, regardless of being a bank or non-bank, are immune to APRA’s restrictions. You simply cannot ignore the restrictions and believe that you can fill your boots with investment loans, as this strategy is not sustainable.

Iden: I don’t think you balance it – you simply always have to do responsible lending. That is a given. As for expanding market share in a tighter lending environment, that’s the real challenge. However, [it won’t block] genuine people, with genuine capacity to repay, out of the market. It will cap some people who perhaps wanted more and more debt. So it’s back to being creative, and promoting great new innovative loan products, such as Rapid Home Loan Reducer, suited to our service proposition, where you need the lengthy advice piece associated with the portfolio approach.

Bluestone: Like every other lender, including the banks, responsible lending is a core component of everything we do, and our transparent approach refl ects our position. There is no balancing act required. We go through numerous checks to make sure customers can service any credit provided to them and that the product they are being matched with is suitable to their needs.

Homeloans: Even prior to the introduction of the National Consumer Credit Protection Act, responsible lending has been a fundamental principal of our business. This would never be compromised, however, we don’t see this as a hindrance to our business.


I believe that the market will remain relatively steady due to the low rates. With stretched affordability and compressing rental yields mainly in Sydney and Melbourne, this should keep a lid on price, but it is evident that the regulatory changes have curbed the investor market. This might be challenged with recent stock market turbulence – we may experience an influx of investors coming back to the property market. My crystal ball take on the property market is one that presents itself as steady, with a couple of speed bumps along the way.

Pepper will continue to lead the way by increasing awareness of specialist lending and be best prepared and receptive to changes that may occur in 2016. Our business is uniquely diverse and not beholden to the investor market or first home buyer market. Our products cater for an array of customer situations and circumstances, positioning Pepper for a strong growth year in 2016.


MPA: With increasing regulation of SMSF investment, will you reduce your presence in this part of the market?
Australian First Mortgage: We will continue to support SMSF lending, so long as the loan is separate to the property transaction. We don’t want to be involved with one-stop brokers who sell the property, act as an agent in fi nancial planning for the new SMSF structure and then complete the loan. We believe there must be separate parties to the transaction to ensure the borrower receives qualified advice.

Homeloans: As with all regulatory or other changes, Homeloans continues to adapt its product offering in order to meet market needs. SMSF lending has always, and will always, be tightly controlled and subject to regulatory changes, however we do see it continuing to be a component of our overall product offering into the future.

RESIMAC: While not specifi cally required under current regulation, RESIMAC does give consideration to the age and type of property being purchased and the overall asset pool of the fund, both before and after the proposed investment is to be made, to ensure our product is the right lending solution for the borrower. Additionally, individuals involved in the transaction are asked to obtain both independent legal and fi nancial advice in relation to the loan being offered. As regulation of SMSF lending shifts, RESIMAC will review our product on offer and make any changes necessary to ensure compliance with relevant legislation at that time.

Better Mortgage Management: Our presence in the SMSF lending market will remain steady in 2016. SMSF has never been a focus for BMM, and new SMSF loans only make up a small amount of our business. From what I can see, the government may make some changes to SMSF, and if this happens, we will revaluate how we approach this market from that point.

Liberty Financial: Liberty has always been at the forefront of SMSF lending and there is obviously still demand for these products and services. We have to be cognisant of regulatory changes so that as the SMSF lending landscape evolves, so too do our products.

Iden: We have had a limited amount of presence in this space to date, but I am of the view SMSF lending still has a part to play, even if a small part. So we’re happy to continue to provide a service proposition in this area.

Read more about SMSF lending in our dedicated SMSF Update section at the front of the magazine, including a Q&A with specialist commercial lender Thinktank.


The state of the Australian housing market heading into 2016 has generated much debate among industry commentators in recent times. The general consensus is that price growth in the Australian housing market will soften over the coming year, but the question – ‘To what level?’ – remains. Some reports suggest a slowdown to two per cent, where others are expecting growth of between four to nine per cent in some capital cities. “SMSF lending has always, and will always, be tightly controlled and subject to regulatory changes”

RESIMAC is backed by an experienced management team and has always maintained a robust and balanced approach to lending. This places us in a comfortable position as we head into what is tipped to be an interesting year for the Australian housing market. In addition to our balanced approach, our relative size allows us to react swiftly to any changes in the market, whether they are positive or negative.


MPA: Should you be marketing yourself directly to consumers?
Liberty Financial: There’s certainly a fantastic opportunity to connect with consumers at the moment. With banks continuing to restrict their lending appetite, and consumers needing alternative lending solutions that help them get financed, Liberty is fast becoming a lender of first choice for borrowers in the know. By increasing the awareness of our brand and our free thinking approach to lending, we can educate more consumers and, ultimately, make the job of our business partners easier. The less time they need to explain who we are and what we stand for, the more time they can focus on doing the things that matter most.

Homeloans: We believe it is important to have a brand that is strong with brokers and trusted by consumers. The broker channel remains to be by far our most important channel, however, in order to assist brokers ‘selling’ Homeloans to their clients, we do engage in brand-building activity, such as our sponsorship of the Perth Scorchers in the T20 Big Bash League. Our continued investment in building awareness of the Homeloans brand is intended to support our broker distribution strategy.

Better Mortgage Management: Currently BMM does not market itself directly to consumers and this will remain true in 2016, as we continue focusing on supporting Australian brokers. We note that some non-banks have a direct channel, which of course is their choice.

The market may change over the next few years, and we will, of course, always rethink our strategy as new information comes in, but building relationships with brokers is integrated into BMM’s DNA and we will always opt for broker channels over direct channels.

Australian First Mortgage: Yes, we should. As a mortgage manager that deals with brokers, we also deal direct with customers who are no longer assigned to a broker. While we value our broker network greatly, the reality is that there are some customers who don’t want to deal with brokers, or the banks, and if we don’t market ourselves well in this space, we will miss out.

Bluestone: We do! The focus of our business remains the provision of lending products and services via our broker network, but we recognise that there are a signifi cant number of potential customers that are searching for a solution direct online. If they are there in search of a solution, then we want to help them where we can. There is scope to increase activity in this area over time, but our commitment to brokers will always remain strong and our primary distribution channel.


Property prices will continue to fluctuate in response to market conditions, and we believe there will remain to be long-term stability and growth Australia wide.

Being a national organisation, we are not at the mercy of the performance of property in any single market in the short term. While Australian capital cities continue to experience population growth, there will be continued demand for housing and, therefore, home loans.

There will always be periods of oversupply from time to time, where developers commit to projects that have long lead times and valuations will reflect such. Homeloans does not, however, foresee any significant fluctuations in property prices that would adversely impact lending activity.

For quite some time, analysts have anticipated a decline in markets that have recently performed strongly, especially Sydney. Whether or not this occurs in 2016, our business’ diversity, from both geographical and product offering perspectives, will enable us to remain strong.


MPA: What is your top product for 2016 and why?
Homeloans: Accelerate Red In addition to our existing comprehensive prime, lo doc and specialty product range, our recently introduced near-prime construction loan, Homeloans Accelerate Red, is yet another innovative solution to meet broker and borrower needs. 2016 will also see the expansion of our self-employed lo doc offering, and introduction of niche commercial products. As always, Homeloans will look to provide a range of solutions for borrowers, that brokers can access with confidence and ease.

Iden: Rapid Home Loan Reducer We love our new innovative Rapid Home Loan Reducer. It has a complexity with it, but for us, that suits our model of having brokers work with savvy investors to work out a portfolio approach. This takes a little more time but we think the benefi ts of ‘home ownership sooner’ is worth the effort. The reducer certainly is innovative, and provides for the lowest home loan rate in the country, without exception, and it really will help borrowers get rid of the home loan sooner.

Pepper: cascading product assessment Our unique cascading product assessment model would position all of Pepper’s products to be mentioned as our best! Our cascading model ensures that every application is run through all three product policies – Prime, Near Prime and Specialist – simultaneously, to ensure that the one application delivers multiple solutions, which maximises the probability of conversion.

Better Mortgage Management: Flexi Ultimate Alt Doc Our top product this year is the Flexi Ultimate Alt Doc. It is a market leading Alt Doc product, with one of the best rates on the market. Not every customer will qualify for this product, however, those that do qualify may have access to great features, such as low rate, unlimited cash out, no risk fee up to 70% LVR and more. All of the features of the Flexi Ultimate Alt Doc are dependent on their own set of criteria.

Australian First Mortgage: Mortgage Shredder Mortgage Shredder, sold under license from Loan Reducer, which enables us to provide a very cheap owner-occupied loan with a higher rate on the investment loan, which is fully tax deductible. Importantly, we have an ATO product ruling to ensure the customer can claim the additional interest on the investment loan, while enjoying the benefit of the cheap rate home loan for their owneroccupied property. A brilliant product for the right customer.

Bluestone: Crystal Blue Our focus for the past six to 12 months has been on supplying solutions for the self-employed market, many of whom are not aware that fi nance solutions are available to them. We have positioned ourselves to capitalise on this under-serviced market.

We have always written business in this area, with our most popular product being the ‘Lite Blue’ loan, designed for the self-employed, companies and trusts who have been ABN registered for 12 months or more where their income is supported by bank statements/BAS or an accountant’s declaration. Crystal Blue is our new product for self-employed customers who’d like to service their debt with clear credit.

Liberty Financial: We like our business partners to think of us as product agnostic, so it’s hard to pull out just one of our products. We’re the only lender that brokers can come to for prime, commercial, motor, SMSF and custom-lending needs. Plus, we approach lending differently, so we can find more ways to say yes.

RESIMAC: In an ever-changing lending environment, it is difficult to isolate just one ‘top product’ that will take us forward during 2016. We are continually looking for ways to enhance our range of lending products and the underlying lending policies attached to those products. This was clearly evident during 2015, where we introduced a comprehensive list of product and policy enhancements, and this approach will continue in 2016. By offering both Prime and Specialist lending solutions, the opportunities for RESIMAC and our business partners are endless.


I think the Sydney-centric approach will change in 2016, and people will once again realise there is a lot more to Australia than just Sydney. We are preparing for that with an expansion of our service levels for brokers in other states, with local BDMs on the spot to help across Australia. We have been busy recruiting four new staff to assist brokers, both as accreditation and application assistants for brokers, plus new BDMs to expand our offering interstate. As for the property market Australia wide, I’m of the view Australia still looks pretty good value now with our exchange rate the way it is and our economy the way it is. With lending regulation and process tightened, it makes it harder, but not impossible, for anyone getting into property, so the best value homes will be the sweet spot. Iden is also putting more energy into the totality of options in 2016. That is to be much more willing to look for solutions of what we can do versus what we can’t do, as many more borrowers simply want a solution. Our one application with multiple solutions is a key benefit of being a non-bank lender.


Despite all the signs showing the property market is cooling, there are still lots of opportunities for the broking community. Recent ABS statistics show there was a 3.5 per cent rise in refi nancing in November, so borrowers across the country are looking for a better deal. Additionally, a cooling property market can also bring more investors previously put off by high prices back into the market.

Finally, as consumer behaviour changes, the industry needs to find innovative ways to meet these changing demands. 2016 will see Bluestone continue to break new ground in delivering innovation that helps more customers achieve their financial goals.


The property market will continue to rise as it always has if you consider the Australian market as a whole. Some micromarket areas may see some reductions and I think this is evident already in parts of Sydney and will probably also occur in Melbourne and Brisbane CBD’s as supply peaks and demand looks to catch up over the next 18 months.

There are question marks around what the government will do with ‘negative gearing’ and capital gains tax, and we cannot say how much effect this may have on investors, but may also contribute to a slower growth in some areas.

We are, as always, keeping a close eye on market changes but are confident that, whatever transpires, we have a strong product offering that will provide ongoing solutions for a broader range of borrowers.