Bank clampdown not pushing investors to non-banks

by Julia Corderoy29 May 2015
Nervous investors are not inundating non-bank lenders in the wake of APRA’s tightening of bank regulations on investor loans, says Firstmac.

Speaking at the Thomson Reuters' 3rd Australian Regulatory Summit this week, deputy governor of the Reserve Bank Philip Lowe said the Reserve Bank would have its eye on rapid growth in non-bank loans as many major and non-major banks announced clampdowns on investor loans.

However, despite the speculation that this could be the outcome, Firstmac CFO James Austin says the non-bank has not seen any spike in loan applications from investors since APRA moved on the banks.

Whilst Firstmac is not regulated by APRA, Austin says the non-bank has taken careful note of developments in the regulatory environment and made its own policy adjustments ahead of any broader prudential measures to control house prices.

“In response to recent tightening of policies targeting banks, we have ceased SMSF lending and will review our investor loan variable interest rates, on top of the robust controls we already have in place.”

Austin says Firstmac’s recent $1 billion RMBS transaction attested to the non-bank’s outstanding credit quality.

“Our success in bond raising is due to our credit quality, which has never been better,” he said.

“Our 30+ days arrears numbers are at 0.61% which means more than 99% of our borrowers are current in their payment schedule. This is better than industry averages which are dominated by APRA-regulated banks.

“89% of the loans written in 2015 had a loan to value ratio below 80%. Just because our interest rates are at record lows, doesn’t mean we have relaxed our credit criteria.”

Firstmac’s growth rate is at 20%, with a similar balance of owner-occupier to investment loans as it has traditionally observed. In fact, in the year to April 2015, investment loans have fallen as a percentage of the portfolio by 3%.

“The mix of investment loans has not increased even though our growth has accelerated, which shows we are a viable option for owner-occupiers and investors alike,” Austin said.

“Non-banks remain a crucial pricing point to keep the banks accountable to the lending public.”