Non-bank lending reached an 11-year high in September 2018, and the share of broker originated loans with non-majors and their affiliates increased by almost 3% in the January to March quarter.
Capitalising on the trend, private equity firms from across the world are now looking for a foot in the door, with a number of major acquisition deals confirmed since 2017: KKR took over Pepper Money; Blackstone became a majority stakeholder in La Trobe Financial; and Cerberus Capital Management acquired Bluestone.
Royden D’Vaz, head of sales and marketing at Bluestone APAC, says, “This acquisition enabled us to pursue aggressive growth targets via mass rate cuts and strategic growth across all our teams.
“Coupled with external market conditions, which currently favour non-banks, in 2018 we saw the value of our applications increase by 54%, with total settlement values increasing by 51%, representing a 39% increase in our number of completed settlements,” he says.
Meanwhile, in the last financial year, Liberty saw its total assets rise to more than $10bn, up 35% year-on-year.
According to group sales manager John Mohnacheff, the growth of the non-bank sector is attributable to changing lending conditions at the mainstream banks and customers demanding more choice. The broker channel has undoubtedly enabled both these factors, as well as supporting the rising number of borrowers in self-employed, contract and gig economy jobs, who require specialist advice.
“The role of non-banks has always been to drive competition and provide more consumer choice, so lenders like Liberty have naturally increased in relevance,” he says, predicting the growth will continue well into 2019 and beyond.
Another factor is the emergence of a new generation of borrowers.
“This provides great opportunity for both non-banks and brokers. Non-banks have a real advantage with younger customers because we are able to drive technological change faster than other lenders. We are constantly developing new tools, such as Liberty IQ, to allow brokers to provide a distinguished service to customers,” he says.
For the seventh consecutive year, Pepper Money has recorded double-digit, year on year growth across its home, car and personal loans. In 2018, the lender is on track to eclipse $6.5bn in settlements, up from $4bn the previous year – an all-time record growth.
“I predict 2019 will be the year that the non-bank sector comes out of the so called shadows, and that can only be a good thing for competition overall, as well as brokers and their customers,” says Pepper Money CEO for Australia, Mario Rehayem.
However, while he predicts greater focus on differentiating the responsible from the unregulated lenders, the downside for 2019 will be tighter lending conditions and softer house prices. But that doesn’t mean credit will dry up.
“I believe that there are still ample opportunities for customers to succeed in getting the loan they deserve. And that’s where a Mortgage broker comes in,” Rehayem says.
“A good broker should keep abreast of what’s happening and ensure they remain focused on the most valuable asset they have, the customer,” he adds.
D’Vaz says, “The role of brokers will continue to grow in importance as investors and homeowners alike navigate a more complex market created by falling property values and tighter lending conditions.”