Alternative lending options

It has been well reported that the Reserve Bank remains concerned about the heated nature of the country’s housing market.

As such, the Reserve Bank is currently looking at further macro-prudential tools – including more investor-focused LVRs and debt-to-income ratios - to try and reign in investors.

Reserve Bank governor Graeme Wheeler has indicated it’s a matter of when, not if, further macro-prudential tools are introduced.

This prospect is causing many investors, particularly those keen to continue growing their portfolios in the near future, a lot of concern.

However, serious investors need not fear: there are alternatives out there.

Mortgage Supply Company director Jenny Campbell said further macro-prudential tools might be introduced – but they would affect trading banks, not non-bank lenders.

That means that investors could still look to non-bank lenders for mortgage loans.

“Non-bank lenders are already looking at how they can capitalise on that and get some good, fairly priced products out for investors that will help them to continue to grow and manage their portfolios with decent yields.”

A thriving non-bank market is good for investors as it offers options, Campbell said.

“It is important to understand the dynamics of a deal though, so investors should get good financial advice to best structure their portfolios in the most effective way.”

Non-bank lenders have long been part of New Zealand’s mortgage lending sector, yet they have tended to fly under the radar of many borrowers.

iLender director Jeff Royle said the banks still have about 90% of the country’s mortgage, but the introduction of further lending restrictions could impact on that.

“As the Reserve Bank tightens up in terms of lending restrictions, people are looking at alternatives to the mainstream lenders. It may well be that the day of the non-bank lending sector is coming.

“That is to be welcomed as it means New Zealanders are recognising there are more options out there than just the big banks – and that gives them more options.”

Traditionally, New Zealanders have been wary of non-bank lenders as they believe they will have to pay significantly higher interest rates without the same level of security a bank can offer.

Royle said non-bank lender interest rates might be a bit higher than those offered by the banks – although not always.

But for increasing numbers of people the choice of who to get a loan from comes down to who will give them a loan, not what the interest rate is.

“As funding lines become more restricted, for more and more people wanting to buy a property the only solution will be non-bank lenders.”

When it comes to the security of non-bank lenders, Royle said the funding lines of the major non-bank lenders - like Resimac, Liberty Financial and Avanti – come from the big banks anyway.

“So they have that security. They rarely have more onerous clauses than the banks.

“They have to abide by the CCCFA and the Property Law Act. Plus New Zealand has some very strict rules and regulations around lending post-GFC.”