Salvest managing director Anthony Ferrero said non-bank lenders are able to provide financing options to borrowers who may not meet the stringent criteria set by traditional banks, especially when it comes to refinancing.
“Non-bank lenders provide more flexible lending terms, quicker approvals, and a willingness to consider projects that might be deemed higher risk by traditional lenders,” he told InfoChoice.
According to Mr Ferrero, here are some examples of the types of assistance non-bank lenders can provide amid increasing rates:
Rate Locks
Even if market rates rise, non-bank lenders can offer borrowers the opportunity to secure their interest rates for a specific duration.
Rate locks typically come with a small fee and last 90 days in duration, enabling homebuyers to secure a home loan rate, find a home, and then settle on the loan.
Quick Approval
Non-bank lenders frequently employ streamlined processes and utilise technology to accelerate the approval and funding of loans.
This becomes particularly beneficial during periods of interest rate hikes when borrowers may need to act swiftly in order to secure a favourable rate or lock in their desired loan terms.
Many non-banks can unconditionally approve a home loan in a matter of a couple days, not weeks.
Flexible loan terms
Borrowers can benefit from the additional flexibility offered by non-bank lenders, which are typically
These options enable borrowers to have greater control over their payments in the face of fluctuations in interest rates.
Refinancing Opportunities
Non-bank lenders are often more receptive to refinancing applications, even if there have been changes in a borrower's credit or financial circumstances.
With the RBA having increased the cash rate by 400 basis points since May 2022, this has led to a serviceability crunch where homeowners are locked into uncompetitive home loan deals, called a mortgage prison.
This is because APRA recommends banks apply a 3% buffer on top of the rate, meaning even if a homeowner is paying off an uncompetitive rate, this equation means they can't service a new rate even if it's lower.
Many banks have responded by lowering their refinancing buffers.
However, non-banks aren't subject to APRA's recommendation and are more flexible in their approach.
Personalised Financial Guidance
Personalised service is a key focus for non-bank lenders, who often have dedicated loan officers or mortgage advisors available to offer guidance and support when interest rates rise.
These professionals can assist borrowers in understanding their options, assessing the potential impact of rate increases on their loans, and devising strategies to minimise any adverse effects.
Competitive Pricing
In times of increasing interest rates, non-bank lenders may adapt their pricing to stay competitive. This may involve offering more attractive interest rates, lowering fees, or providing incentives to entice borrowers such as cashback offers.
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