Australia’s property investment landscape is evolving, and so too are the financing strategies behind it. While the major banks still dominate the mortgage market, a growing number of investors are turning to non-bank lenders for greater flexibility, faster approvals, and tailored loan structures.

Backed by insights from institutions like the Reserve Bank of Australia and Australian Securities and Investments Commission, the rise of non-bank lending reflects changing borrower needs particularly among investors with complex financial situations.

What Is a Non-Bank Lender in Australia?

A non-bank lender is a financial institution that provides loans but does not hold customer deposits. Unlike traditional banks, these lenders are not authorised deposit-taking institutions (ADIs).

Major banks such as Commonwealth Bank, National Australia Bank, Westpac and ANZ are regulated as ADIs by the Australian Prudential Regulation Authority, meaning they can accept deposits and are subject to strict prudential oversight.

Non-bank lenders, on the other hand:

• Cannot accept deposits
• Are not regulated by APRA in the same way
• Must hold an Australian Credit Licence
• Operate under the National Consumer Credit Protection Act

They are regulated and monitored by ASIC, ensuring they meet responsible lending obligations despite their different funding structure.

How Non-Bank Lenders Fund Home Loans

Instead of using customer deposits, non-bank lenders rely on wholesale funding sources.

According to the Reserve Bank of Australia:

• Non-banks commonly use securitisation
• Funding is raised through mortgage-backed securities (MBS)
• Warehouse funding facilities are often used to support lending

While funding conditions tightened during the Global Financial Crisis, government support and improved market conditions have helped the sector recover and grow steadily since the mid-2010s.

Why Property Investors Are Choosing Non-Bank Lenders

Flexibility for Complex Borrowers

Non-bank lenders are particularly attractive to:

• Self-employed borrowers
• Investors with multiple properties
• Borrowers with higher debt-to-income ratios

Traditional banks often apply stricter assessment criteria, which can limit borrowing options for these groups.

Faster Loan Approvals and Streamlined Processes

Non-bank lenders typically operate with:

• Leaner approval systems
• Faster turnaround times
• More digital-first platforms

This speed can be critical in competitive property markets where timing can determine whether a deal is secured.

Investor-Friendly Loan Products

Many non-bank lenders offer products tailored to investors, including:

• Interest-only loans
• Flexible repayment structures
• Customised lending solutions

These options can better align with investment strategies focused on cash flow or portfolio growth.

Serviceability Flexibility Beyond APRA Constraints

Banks regulated by APRA must apply a minimum 3% serviceability buffer when assessing loan applications.

Non-bank lenders are not bound by this exact requirement, which can:

• Increase borrowing capacity
• Provide more flexibility in loan structuring

However, they must still comply with responsible lending laws enforced by ASIC.

Growing Market Share and Innovation

The non-bank sector has grown significantly since around 2015, supported by:

• Fintech innovation
• Increased competition in lending
• Rising demand for flexible finance options

Although still a smaller share of the overall lending market, non-banks are becoming a mainstream option for investors.

Bank vs Non-Bank: Which Is Better for Property Investors?

Why Some Investors Still Choose Banks

Traditional banks remain popular due to:

• Long-standing reputation and perceived stability
• Access to in-branch services
• Broad product ranges

For straightforward borrowers with stable income, banks often remain the default choice.

Why Investors Are Blending Lending Options

Many experienced investors now use a hybrid approach:

• Banks for standard residential lending
• Non-banks for complex or time-sensitive deals

This strategy allows investors to maximise borrowing capacity while maintaining flexibility across their portfolio.

Key Considerations Before Choosing a Lender

Before deciding between a bank and a non-bank lender, investors should assess:

• Their income structure and financial complexity
• Required speed of approval
• Loan features and flexibility
• Long-term investment strategy

Working with a mortgage broker or finance specialist can help navigate both lending environments effectively.

Conclusion: Matching the Lender to Your Investment Strategy

The rise of non-bank lending in Australia reflects a broader shift toward flexibility and borrower-specific solutions. While traditional banks continue to dominate, non-bank lenders are carving out a strong position, particularly among property investors with complex needs.

Ultimately, the right choice depends on your strategy. Whether prioritising speed, borrowing power, or simplicity, aligning your lender with your investment goals is key. Increasingly, investors are recognising that the best solution may not be one or the other but a combination of both.

How can we help?

If you have any questions or would like further information, please feel free to give our office on 08 9221 5522 or via email – info@camdenprofessionals.com.au  or arrange a time for a meeting so we can discuss your requirements in more detail.

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General Advice Warning

The material on this page and on this website has been prepared for general information purposes only and not as specific advice to any particular person. Any advice contained on this page and on this website is General Advice and does not take into account any person’s particular investment objectives, financial situation and particular needs.

Before making an investment decision based on this advice you should consider, with or without the assistance of a securities adviser, whether it is appropriate to your particular investment needs, objectives and financial circumstances. In addition, the examples provided on this page and on this website are for illustrative purposes only.

Although every effort has been made to verify the accuracy of the information contained on this page and on this website, Camden Professionals, its officers, representatives, employees, and agents disclaim all liability [except for any liability which by law cannot be excluded), for any error, inaccuracy in, or omission from the information contained in this website or any loss or damage suffered by any person directly or indirectly through relying on this information.

In today’s fast-paced financial landscape, flexibility and speed often outweigh the traditional routes of securing a loan. For many borrowers, Non-Bank Lenders are becoming the go-to solution for funding needs across various sectors. Whether you’re navigating the complexities of property finance or seeking short-term business capital, Non-Bank Lenders offer distinct advantages that can make all the difference.

What is a Non-Bank Lender?

A Non-Bank Lender, also known as a private lender or alternative lender, is a financial institution that provides loans and other financial products outside the traditional banking system. Unlike banks, which are regulated depository institutions, Non-Bank Lenders do not hold banking licenses and do not offer services like savings accounts. Instead, they hold regulatory financial licenses that allow them to offer specialized lending products to borrowers who may have substantial assets to secure their loan but do not meet the strict criteria of traditional banks.

Non-Bank Lenders have become an essential part of the financial landscape, contributing to increased competition in the lending industry and offering borrowers greater choices when seeking financing options. As the market continues to evolve, they play a crucial role in addressing the diverse financial needs of borrowers and promoting financial inclusion for a wider range of individuals and businesses.

Top 5 Reasons Borrowers Use Non-Bank Lenders

1. Speedy Loan Approvals

Non-Bank Lenders are known for their fast, flexible, short-term loans and rapid loan approval processes. Unlike the often time-consuming processes at traditional banks, these lenders provide quick approvals, allowing borrowers to act swiftly in dynamic markets like real estate.

1. Flexibility

Non-Bank Lenders typically employ more flexible underwriting criteria compared to traditional banks. This makes financing more accessible to borrowers whose credit histories or financial situations may not meet standard banking requirements. This flexibility opens the door to more funding opportunities for various projects, enhancing business potential.

1. Tailored Lending Solutions

Non-Bank Lenders offer the advantage of tailored lending solutions. Recognizing that borrowers have unique financial objectives, these lenders craft bespoke loan products that align with the specific needs and preferences of borrowers and brokers alike. This enables borrowers to access the ideal financial tools to achieve their business goals.

1. Wide Range of Products

Specializing in unique products for various real estate and business projects, Non-Bank Lenders act quickly, helping borrowers secure funding when time is critical. Their extensive range of financial products allows borrowers to find the right fit for a wide variety of projects and investment opportunities.

1. Personalized Relationship Management

Non-Bank Lenders place a strong emphasis on building relationships with both brokers and direct borrowers. This personalized approach fosters open communication and helps lenders understand the specific goals and challenges of their clients. By offering tailored guidance and support, Non-Bank Lenders provide an enhanced lending experience.

Conclusion

The rise of Non-Bank Lenders has transformed the lending landscape, providing new opportunities for borrowers seeking finance. As the real estate and business markets continue to evolve, many borrowers are discovering that Non-Bank Lenders offer faster, more flexible, and tailored financing solutions compared to traditional banks. Their speed, personalized service, and wide range of products make them an appealing choice for those who need funding quickly and efficiently. Whether you’re looking for property finance or short-term business capital, turning to a Non-Bank Lender may be the right decision to meet your financial needs.

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How can we help?

If you have any questions or would like further information, please feel free to give our office on 08 9221 5522 or via email – info@camdenprofessionals.com.au  or arrange a time for a meeting so we can discuss your requirements in more detail.

How can we help?

If you have any questions or would like further information, please feel free to give our office on 08 9221 5522 or via email – info@camdenprofessionals.com.au  or arrange a time for a meeting so we can discuss your requirements in more detail.

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General Advice Warning

The material on this page and on this website has been prepared for general information purposes only and not as specific advice to any particular person. Any advice contained on this page and on this website is General Advice and does not take into account any person’s particular investment objectives, financial situation and particular needs.

Before making an investment decision based on this advice you should consider, with or without the assistance of a securities adviser, whether it is appropriate to your particular investment needs, objectives and financial circumstances. In addition, the examples provided on this page and on this website are for illustrative purposes only.

Although every effort has been made to verify the accuracy of the information contained on this page and on this website, Camden Professionals, its officers, representatives, employees, and agents disclaim all liability [except for any liability which by law cannot be excluded), for any error, inaccuracy in, or omission from the information contained in this website or any loss or damage suffered by any person directly or indirectly through relying on this information.

When it comes to getting a home loan in Australia, you’re spoilt for choice. You could approach some of the big banks or the smaller, customer-owned banks or credit unions, and there is also a good selection available from non-bank home loan lenders.

Despite this breadth of choice, the big four banks – ANZ, the Commonwealth Bank, NAB and Westpac – dominate the mortgage market. They account for about three-quarters of the nation’s owner-occupier home loans, as listed by the Australian Prudential Regulation Authority (APRA).

But that list doesn’t include all lenders including non-bank lenders. Yet, despite them not being household names, you may find a mortgage with the rate, features and flexibility you’re looking for among Australia’s non-bank home loan lenders.

What is a non-bank lender?

Non-bank lenders are financial institutions that offer home loans and other credit products without being a bank. Non-bank lenders do not hold an Australian banking licence, meaning they cannot offer deposit accounts such as savings accounts, transaction accounts and term deposits.

It also explains why non-bank home loan lenders are not classified by APRA as authorised deposit-taking institutions (ADIs), but rather as non-ADIs. Just because a non-bank (or non-ADI) doesn’t offer cash accounts doesn’t mean it can’t provide a good value home loan – and more home buyers are beginning to recognise this.

The Reserve Bank of Australia (RBA) says non-bank lending has grown rapidly and in April 2022 non-bank home loan lenders collectively notched up growth close to a decade-long high of around 20% (on a six-month-ended annualised basis). That said, the RBA adds that non-banks still account for less than 5% of the overall home loan market.

Do non-bank lenders have lower home loan interest rates?

Interest rates vary across all home loan lenders – both banks and non-banks – so it can make sense to shop around and compare rates for a wide cross-section of lenders.

As a general guide, among the non-bank home loan lenders on the Canstar database, the average variable home loan rate was 4.26%, at the time of writing (see table below). That’s 0.62 percentage points less than the average variable rate among ADI lenders (remember, these are financial institutions that can accept cash deposits).

Average variable and fixed home loan rates ADIs vs non-ADIs

Lender type	Variable	1 year fixed
ADI	4.88%	5.04%
Non-ADI	4.26%	5.28%

Source: www.canstar.com.au – 20/09/2022. Based on owner occupier home loans on Canstar’s database available for a loan amount of $500,000, 80% LVR and principal and interest repayments, excludes introductory and first home buyer only loans.

A rate difference of 0.62 points may not sound like much, but on a typical home loan of, say, $500,000 repaid over 25 years, it can reduce monthly repayments by $177, according to Canstar’s mortgage calculator. That provides a long-term interest saving of almost $53,000.

The picture changes, though, if we look at fixed rates. Among ADI’s the average 1-year fixed rate is 5.04%, which is 0.24 points below the average of 5.28% across non-bank home loan lenders.

This reinforces the value of casting your net wide and looking at what’s available from a variety of lenders.

How safe are non-bank home loan lenders?

In Australia, we are fortunate that both banks and non-bank home loan lenders are carefully regulated. ADIs are regulated by APRA. Non-bank home loan lenders, on the other hand, are regulated by the Australian Securities and Investments Commission (ASIC) and the National Credit Code.

It means non-bank lenders need to have an Australian Credit Licence to provide home loans, and they must abide by the same rules and regulations as ADIs in terms of making responsible lending decisions.

What types of home loans do non-bank lenders offer?

Non-bank lenders typically offer the main types of home loans, which we’ve outlined below. Other types of loans such as bad credit home loans for borrowers who may have a poor credit score, or low doc home loans often pitched at self-employed people, may be available from niche providers.

1. Basic home loans

Basic home loans can be variable rate loans or fixed rate loans and they are exactly what the name suggests – basic, with fewer bells and whistles in terms of loan features.

2. Standard full feature home loans

Full feature home loans also come in either variable or fixed rate form, but they can have added benefits that may include offset accounts, redraw facilities and the ability to make fee-free additional repayments.

If you’re wondering how non-bank home loan lenders can offer offset accounts when they are not licensed to take cash deposits, part of the answer is that many team up with an ADI to provide the linked offset account with a government guarantee. But it’s extremely important to understand how a non-bank lender’s offset facility works before committing to the loan and keeping cash stashed away in the offset account. For example, with a non-bank lender, money held in a an offset facility may not be protected by the government’s Financial Claims Scheme.

3. Split rate home loans

A split rate home loan involves splitting your loan into two components, one with a fixed interest rate and the other with a variable rate. In this way, split loans can give you the best of both worlds – the certainty of a fixed rate and the flexibility and features of a variable rate loan.

Where do non-banks get their funding?

Both bank and non-bank lenders access wholesale money markets to raise the funds needed to provide home loans. This is essentially banks lending to one another.

Banks can also access their own customers’ deposits to lend out as home loans, but strict rules apply around how much of these savings can be lent out. Non-bank lenders may also use a process called ‘securitisation’ to raise funds for home loan lending. In simple terms, this means investors provide the capital to lend out as a mortgage.

The upshot is that banks and non-bank home loan lenders can use a variety of funding sources for home loans.

What happens if a non-bank home loan lender goes bust?

If a non-bank home loan lender went broke, your home loan wouldn’t suddenly disappear into the ether.

A possible chain of events would be that another bank or non-bank would purchase your lender’s portfolio of home loans. From your perspective it would likely be business as usual in terms of making repayments, or there is always the option to refinance the home loan with a new loan and lender.

As mentioned above, it’s important to understand how your non-bank lender’s offset facility works (e.g. is it backed by another bank covered by the Financial Claims Scheme) so you know what could happen to any funds held in an offset facility if the lender goes out of business.

Source: Canstar

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General Advice Warning

The material on this page and on this website has been prepared for general information purposes only and not as specific advice to any particular person. Any advice contained on this page and on this website is General Advice and does not take into account any person’s particular investment objectives, financial situation and particular needs.

Before making an investment decision based on this advice you should consider, with or without the assistance of a securities adviser, whether it is appropriate to your particular investment needs, objectives and financial circumstances. In addition, the examples provided on this page and on this website are for illustrative purposes only.

Although every effort has been made to verify the accuracy of the information contained on this page and on this website, Camden Professionals, its officers, representatives, employees, and agents disclaim all liability [except for any liability which by law cannot be excluded), for any error, inaccuracy in, or omission from the information contained in this website or any loss or damage suffered by any person directly or indirectly through relying on this information.