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While the big banks still dominate as the preferred option for borrowers looking to finance a property, non-bank lenders have expanded their footprint, especially over the past decade.
These non-traditional lenders are particularly popular among borrowers with complex income or portfolio structures as many of them are typically flexible in their lending requirements and may be able to offer loans tailored to an individual’s specific circumstances (e.g., self-employed).
What is a non-bank lender?
Much like banks, a non-bank lender is a financial institution that provides credit (or loans). However, non-bank lenders are not able to hold deposit funds (i.e., everyday transaction accounts).
Traditional banks like the ‘big four’ (CommBank, NAB, Westpac, ANZ), as well as credit unions and building societies are authorised deposit-taking institutions (ADIs) supervised by the Australian Prudential Regulation Authority (APRA).
Since non-bank lenders don’t accept deposits, they are not authorised deposit-taking institutions and therefore are not prudentially regulated by APRA in the same way banks, credit unions, and building societies are.
It doesn’t mean, however, that non-bank lenders are unregulated.
Non-bank lenders operate under Australia’s consumer credit laws, which means they must hold an Australian Credit Licence (ACL) and comply with responsible lending and conduct obligations under the National Consumer Credit Protection Act, and are supervised by Australian Securities and Investments Commission (ASIC).
Examples of non-bank lenders
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Mortgage lenders and specialist housing financers
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Finance companies
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Mortgage securitisers and private lenders (as long as they don’t take deposits)
Where non-bank lenders source their funds?
Instead of sourcing funding from customer deposits, non-bank lenders fund home loans via securitisation structures or wholesale funds and lend them out to their customers. The Reserve Bank of Australia notes that many non-bank lenders rely on warehouse facilities and mortgage-backed securities (MBS) markets for funding.
Many non-bank lenders have been around since the 1990s and early 2000s. However, when the 2008 global financial crisis made wholesale funding harder to secure, many borrowers turned to traditional banks that weathered the downturn more strongly.
Government intervention, providing affordable funding, has helped non-banks stay afloat and their popularity has been rising since 2015. Even so, non‑bank credit still makes up a small share of Australia’s credit market.
Why investors consider non-bank lenders over traditional banks
Flexibility for complex borrowers
Non‑banks often serve specialised or complex borrower groups (i.e., self‑employed, multiple properties, or those with higher debt-to-income ratios) traditional banks may decline.
Faster approvals and streamlined process
Many non-bank lenders offer leaner and faster approval processes, a competitive edge in time-sensitive property purchases.
Many products fit for investors
Many non‑banks offer interest‑only products, for instance, which suit investors who may not fit traditional ADI lending models.
Not bound by APRA’s serviceability buffer
Traditional lenders must assess borrowers with a minimum 3‑percentage‑point buffer, which limits borrowing power. Non‑banks aren’t required to apply this buffer, which can allow higher borrowing capacity, provided lending remains responsible.
Growing presence and acceptance
The non‑bank sector has been expanding again since the mid‑2010s, supported by fintech innovation and increased consumer demand for flexibility.
Common misconceptions about non-bank lenders
“Non‑banks aren’t regulated.”
False. They are ASIC‑licensed credit providers and must meet responsible‑lending and other NCCP obligations.
“They’re only for ‘problem’ borrowers.”
Not necessarily. Non‑banks play a complementary role, financing borrowers that may not fit bank requirements, especially when prudential buffers at banks tighten. Plenty of customers who can obtain loans through banks also elect to use non-banks.
Choosing between bank and non‑bank for your strategy
Choosing whether to go for a traditional bank or a non-bank lender for your financing needs depends on several factors.
Some may still opt for traditional banks as they have been in existence for longer and are perceived safer. The availability of in-branch services can also be a factor as non-bank lenders are typically digital-only or web-based.
However, it's worth noting that non-banks are also held to many of the same rules and regulations as traditional banks. If you prioritise faster turnaround, streamlined process, and tailored financing product, non-bank lenders can be an ideal option.
Whether you opt for a traditional bank or a non-bank lender should depend on what you value as a borrower. Many seasoned investors blend sources, using bank finance where it fits, and non‑banks for edge cases (e.g., interest‑only cash‑flow plays, construction, or where speed wins the deal).
As always, match the lender to the strategy, compare options rigorously, and work with experts who understand both regimes.
One of non-bank lenders offering flexible lending solutions in Australia is loans.com.au. Since 2011, we have worked hard to make it easier for Aussies, including self-employed borrowers and property investors, to access home loans with competitive rates and fast approvals. Explore our investor-friendly products today.
Disclaimer: This article contains general information only and does not take into account your personal financial situation, objectives, or needs. It should not be considered financial or credit advice. Before making any borrowing or investment decisions, seek independent advice from a qualified professional and compare products to determine what is appropriate for your circumstances.
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