Covid crisis sees rise in non-bank lenders

Since the start of the Covid crisis, there’s been a sharp rise in demand for home loans from non-bank lenders.

Roughly 3% of home loans in New Zealand are from non-bank lenders. However, many are reporting significant increases in enquiries since the start of the pandemic. Resimac and Select, for example, has seen enquiries grow by 30% since Easter.

A buoyant property market and record-low interest rates are undoubtedly fueling the increased demand. Plus, there’s no doubt the big banks have become more risk-averse. Many have tightened their lending criteria as the economic fallout from Covid-19 continues to bite. In addition, the Reserve Bank has put pressure on banks to hold onto capital.

In this environment, it’s no surprise that customers are now turning to non-bank lenders for more flexible home loan options.

Every borrower is unique. And for many, these second-tier lenders have much to offer.

Unlike high street banks, non-bank lenders are not governed by the Financial Markets Authority or the banking ombudsman. Often smaller, privately owned businesses, they tend to be more flexible than mainstream banks and have greater freedom from restrictions.

Non-bank lenders are, however, regulated by the Reserve Bank, making them as trustworthy as the mainstream banks.

However, it’s the flexibility of second-tier lenders that makes them an attractive option, especially for those who have been turned down by the banks. People who have had a “credit issue”, or who are self-employed and find it difficult to prove their income are increasingly looking to non-bank lenders.

And contrary to popular belief, the banks don’t have a monopoly on the best mortgage rates. Non-bank lenders can be just as competitive, particularly in the variable interest rate space. And because they are smaller, there’s often less paperwork to complete, which means they offer a faster, more responsive service.

Now is undoubtedly a good time to buy property in New Zealand. And thanks to the increased popularity of non-bank lenders, the options open to borrowers are more flexible than ever.

If you’re thinking about a non-bank loan, then let’s talk. Get in touch for a discussion before you make any decisions.