Activity growth results from tightened credit conditions
Investors are more likely to turn to private lenders for new finance sources as banks tighten their credit conditions, according to mortgage advisers.
As private lender activity grows, mortgage advisers predict that small private lenders will grow their market share following the government’s new housing package, the reintroduction of loan-to-value ratio (LVR) restrictions, and potential introduction of interest-only lending curbs and DTIs.
Mortgages Online broker Hamish Patel said he had two or three private funders contact him in the past month to look for deals.
“More people are looking at development funding for units and houses, and there’s a lot of funds available for that kind of stuff, with people looking for returns on their money. They aren’t getting that from term deposits,” Patel added, as reported by Good Returns.
Meanwhile, Jeff Royle, an adviser specialising in non-bank deals, predicts a rise in private development funding.
“Private lending is definitely on the increase. The banks have little or no appetite for development funding unless the customer is well-heeled in both assets and cashflow. Most are not,” Royle said, as reported by Good Returns.
Patel offered assurances that private lenders remain active and keen to provide finance, loans for development, and funds for commercial deals.
“They will charge higher rates than the banks, 7% or 8%, but they don’t look at income,” he said.
However, he warned that there were key factors to consider before choosing between non-bank lenders and small private lenders.
"Some non-bank lenders will only charge you on what you use, but some of the smaller private funds will have all the money drawn down and charge you interest from day one,” Patel said.
