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    "Marty was fantastic! We swore never to use a broker again after bad experiences with other brokers in the past, and our last loan we negotiated ourselves, however this time we needed a mortgage... " – Blake Millgate
    "It is impossible to exaggerate how highly I rate Mortgage Experts and my experience with Marty McDonald... " – Brendan Arlington
    "Mortgage Experts have provided a fantastic experience in an area that can be complicated and emotional. Marty was always clear and precise and always made time to discuss the matters at hand... " – Brett Parker
    "I was really impressed with Marty's services. He was responsive to emails and calls, considered a range of options, and kept me informed at every stage. He was also very patient... " – Elise Darsow
    "Marty was great to deal with. From initial contact to finding a perfect solution and strategy to our situation to then securing the funding in a tight time frame nothing was too much trouble... " – Nick and Blaise Porter
    "Great service! All the advice I've received in the past has been really helpful. Love the newsletters which keep me updated on developments in the market. Highly recommended! " – Nick Jolly
    "I have used Marty's mortgage brokerage service (Mortgage Experts). He has been professional, resourceful, gone beyond the call of duty in servicing my mortgage. He has been able to... " – Prithvi Moses
    "We’re both really happy to have been able to get this sale across the line and are particularly grateful for you finding us a way to make the finance work! Walking into our new home... " – Sarah Macdonald & Stewart Bovell
    "We found Marty McDonald from Mortgage Experts through a Google search because he had a hugely informative page about family trust loans. Choosing Marty as our broker was a huge blessing... " – Tracey Cools

Non bank lenders

What exactly are non bank lenders?

Non bank lenders are lenders who do not hold an Australian banking licence and who are not a mutual i.e. they are not a bank, a building society or a credit union. A true non bank lender is one who sources their own wholesale funding and then lends out their funds making a margin on the difference.

Non bank lenders are less prevalent today than they were in 1990’s and early 2000’s ; the onset of the GFC and resultant credit squeeze has severely restricted access to cheap wholesale funding via the securitisation markets that was most non banks lifeblood. At this stage the market for mortgage backed securities shows no sign of returning to pre GFC levels meaning non bank lenders have had to find another source of funding to survive or they had to focus on higher margin loans. There has been some funding made available through the government backed (AOFM) mortgage securitisation scheme, however the main source of funding for many non bank lenders is now directly from their competitors the banks themselves! Rams is the classic example of a non bank lender that isn’t really a non bank lender being 100% owned and funded by Westpac.

Mortgage managers are another type of lender that are often called non bank lenders. Typically mortgage mangers have agreements with lenders such as ING, Adelaide Bank and Nab (through their wholesale arm Advantedge)  to access funds at wholesale prices and then lend the funds out under their own brand with a margin included in the end interest rate payable by the borrower. Each loan is funded at the individual loan level i.e. the bank funders do not provide a large chunk of funds to the managers to lend out, they provide individual loan funds at the settlement of each loan. The manager controls the process of approving loans (as long as they are within set guidelines) and manages the loan and customer through to the eventual loan discharge.

To confuse matters some mortgage mangers are also non bank lenders in true sense of the word. Typically they are mangers for the more straight forward loans at competitive interest rates and true non bank lenders (i.e. they lend their own funds) for higher risk loans such as lo doc loans and credit impaired loans.

Pro and cons of choosing non bank lenders

Pros

  • Non bank lenders interest rates can be lower.

  • Often the service provided by non bank lenders can be superior to a major bank especially in times when the major banks are slow in processing loan applications.
  • Some non bank lenders offer loans that wouldn't be approved through major lenders or mortgage insurers such a specialised lo doc loans and loans that allow some past credit impairment.
  • For development finance often no pre sales are required and non bank lenders can often fund a % of the end realisation of the project not just a % of costs. 

Cons

  • Traditionally non bank lenders offer very competitive interest rates for home loans but much higher exit fees which can be as high as 1% or 2% of the original loans amount in the first 5 years of a loan. This is set to change with the banning of exit fees on all new loans from July 2011 onwards. At this stage it is not know how most non bank lenders will respond to the exit fee changes but most industry pundits are suggesting that they will be forced to charge higher upfront fees and or higher interest rates. Note to date this has not happended (September 2011).

  • The funding sources of non bank lenders may be cut off in the future which means your loans interest rate may not end up as competitive as it was to start with and your loan may be “on sold” to another lender if they go out of business. In fairness this could happen with any lender but it seem more unlikely to happen to a major bank.

  • For development finance non bank lenders charge a higher rate than major banks.

 

So is it worth considering non bank lenders for your next loan?

 

In the past when recommending non bank loans to our clients our major concern was always the potential large exit fees or "deferred establishment fees" that could be payable within the first few years of a loan if repaid early. This could more than offset the slightly lower interest rates sometimes available. With the changes to exit fees as mentioned above, perhaps non bank lenders will become a more attractive option for borrowers over all. Time will tell.

So in summary it is definitely worth considering alternatives to the major banks such as non bank lenders, second tier banks, mortgage managers and mutuals. Whether a non bank lender is right for you really depends on your own unique situation and plan. 

Why not enquire online so we discuss the pros and cons in your unique situation.

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Lex Luther Enterprises Pty Ltd (ABN 58114636949) trading as “Mortgage Experts” is an Authorised Credit Representative (444479) of Martin Warren Thomas McDonald, Australian Credit Licence (391230) under s64(1) of the National Consumer Protection Act 2009.