Non-bank lenders could lose their advantage over major lenders after APRA crackdowns

Some of the smaller lenders in the mortgage market say stricter lending controls from the Australian Prudential Regulation Authority are hurting their business and taking away the advantage they had over the majors.

According to shadow lenders Liberty Financial, Resimac and Pepper Group, if APRA goes ahead and introduces caps on loan growth it may shut out large sections of the community trying to access housing finance.

The problem for these smaller operators is the clampdowns hit them as well as the larger lenders in the banking sector it will take away the advantage they had over them and put pressure on them to scale back.

James Boyle from Liberty Finance told Australian Financial Review the caps would mean his business would look at withdrawing from making low doc and non-conforming loans and look to pursue a full banking licence instead to stay competitive.

“We think it would be an adverse outcome for customers but a very real strategic option for us is to become a bank,” he said.

“It may make sense for us.”

Liberty Finance specialises in loans to borrowers who have a limited credit history, as do many other shadow lenders.

APRA maintains its restrictions need apply to all lenders in the market and are keeping a close eye on non-bank lenders in case they simply picked up the slack from borrowers frozen out of banks due to the clampdown.

Pepper Group’s chief financial officer Cameron Small said he is concerned about the unintended consequences of the restrictions for customers of non-bank lenders.

“It is essential that legislation and regulation is introduced in a manner that does not result in the exclusion of a whole segment of ordinary Australians from accessing housing finance,” he told Australian Financial Review.


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