Non-banks confirmed as crucial competition in mortgage market

Non-bank lenders are playing a vital role in Australia’s housing finance ecosystem, especially as affordability pressures intensify, according to a new report from the Australian Finance Industry Association (AFIA).

AFIA’s inaugural report on residential mortgage non-bank lenders (RNBLs) finds that non-banks are opening up access to credit for thousands of creditworthy Australians who are often overlooked by traditional banks – including freelancers, contractors, and small-business owners.

Through product and service innovation, sharper competition and a willingness to serve more complex income profiles, RNBLs are providing “essential market dynamism and financial inclusion” in Australia’s mortgage market. 

The findings come amid a broader lift in credit activity, with recent Equifax data showing stronger mortgage demand alongside rising unsecured credit use as households become more confident and re‑engage with borrowing.

‘Non-bank lenders are helping thousands of Australians’

AFIA CEO Diane Tate (pictured) said the research confirms RNBLs are a critical and well-regulated part of the financial system.

“Non-bank lenders are helping thousands of Australians achieve their homeownership dreams," Tate said. "They deliver competition, choice and access for borrowers, and operate under a robust regulatory and funding framework."

She the report shows non-bank lenders are opening up access for borrowers that traditional banks often overlook, while also driving the market forward through sharper pricing, more innovative products and improved service for customers.

“The data confirms that non-bank lenders are well regulated and committed to responsible lending, consistently reporting low arrears rates, prudent lending standards, and strong support for customers in hardship," Tate said.

“Non-bank lenders are a disciplined part of the financial system – they’re licensed, consumer-regulated, and held to the same responsible lending standards as traditional banks, delivering safe, responsible lending for borrowers.

The AFIA chief said that with housing accessibility now front and centre, non-bank lenders have become more important than ever, helping everyday Australians – including freelancers, contractors and small-business owners – take their first step onto the property ladder.

Key takeaways for brokers: Access, prudence, and hardship support

Developed with Positive Economics Advisory, the report quantifies the growing – but still niche – contribution of RNBLs to housing finance:

• In FY25, RNBLs supported around 51,000 Australians to purchase or refinance a home, typically focusing on underserved segments such as self-employed borrowers and those with more variable income.
• RNBLs’ total loan book stands at $72.2 billion, representing around 3% of national housing finance – a relatively small share, but one that adds meaningful competition and choice.
• RNBLs’ share of new loans with loan-to-value ratios (LVRs) above 80% is below 20%, compared with more than 30% among the major banks, pointing to generally prudent leverage settings.
• Arrears outcomes are broadly comparable with the majors: RNBLs have a slightly higher share of early-stage arrears (0.67% vs majors at 0.58%) but a lower share of 90+ day arrears/non-performing loans (0.81% vs majors at 1.10%), consistent with responsible lending practices.
• More than 80% of hardship applications received by RNBLs are approved, underscoring a strong focus on supporting customers experiencing financial stress.

For mortgage brokers, AFIA’s findings reinforce the role of non-banks as a viable option for creditworthy clients who sit outside traditional bank appetite – particularly those with non-standard income, higher serviceability complexity, or a need for more tailored product solutions – while still operating under a robust responsible lending and regulatory framework

Get the hottest and freshest mortgage news delivered right into your inbox. Subscribe now to our FREE daily newsletter.