Many are seeing them as a useful option
Many homebuyers and homeowners who are struggling with their finances are opting for non-bank lenders because of the difference in their lending criteria compared to banks, as reported in an article by RNZ.com.
Notably, non-bank lenders often charge higher interest rates compared to banks when it comes to home loans and other lending. However, they have a different lending criterion that may be more helpful for certain people.
In the article, Loan Market Mortgage Adviser Karen Tatterson noted that it was common for those who have a mortgagee sale to opt for a non-bank lender.
“Many times the owners leave the investigation via a mortgage adviser too late in the process. This results in the property being listed and then cancelled once second-tier lending has been approved,” explained Tatterson.
Real estate agency Barfoot & Thompson stated that 15% of mortgagee sales were halted following agreements that had the owner keep the property or a court injunction. Tatterson pointed out that while a non-bank lender served as a short-term solution for such a sale, it allowed many people to hold onto their homes.
Notably, the home loan is refinanced from the non-bank lender back to a main bank after a short time. Non-bank lenders Resimac and Liberty offer competitive rates with the former advertising an 8.09% floating rate, a 6.3% two-year rate, and a 6.7% one-year rate while the latter has a floating rate of 8.15%, a 7.75% two-year rate, and an 8.05% one-year rate.
This is in comparison to ASB with a floating rate of 7.39%, a two-year rate of 5.49% and a one-year rate of 5.79%.
“Typically second tier lending is priced as floating with options of fixed rates typically fewer and less attractive, so this might be off putting in a rising interest rate market. But this is more attractive right now while in a falling interest rates market,” said Key Mortgages adviser Jeremy Andrews.
“With main bank timeframes stretching out last year to often weeks turnaround times, second tiers can sometimes approve lending much quicker too.”
According to the data from the Reserve Bank, the amount of housing lending by non-bank lenders have decreased to $5.4 billion last November 2024 compared to the $6.05 billion in November 2022. However, there appeared to be a fluctuation as November 2023 saw it drop to $5.015 billion but climb back to $5.78 billion in July 2024.
