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As the economy again gathers momentum, self-employed borrowers – who traditionally fall outside the banks’ lending criteria – will increasingly look for finance as they prepare for growth.
According to Patrick Tuttle, CEO of Pepper Home Loans, there is likely to be a considerable need for refinancing and debt consolidation for business owners now that the economy is picking up, which will translate into opportunities for brokers.
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“There will be borrowers out there who will be looking to clear debts that they have accrued over the last year or so but they are struggling to find lenders that cater for them,” he told Mortgage Busniess.
Over the last 18 months the banks have increasingly lost their appetite for risk in a market where liquidity has largely dictated mortgage lending policy.
As well as pairing back on maximum LVRs, most banks have also tightened up on the profile of borrower that they will consider lending to, leaving a gap in the self-employed and small business owner market.
As the banks have reevaluated risk, they have also overlooked a segment of essentially good business.
“There is definitely a market out there that is largely being overlooked.” Mr Tuttle said.
“This is not a credit impaired market we’re talking about, this is prime business.
“Self-employed borrowers and small business owners have found it increasingly difficult to secure finance despite the fact they have a clean credit history,” he said.
Backed by fresh warehouse facilities, Pepper last month launched two flagship products for this segment, including a full income documentation loan (full doc) and an alternative income documentation loan (alt doc).
“With so many players now gone from this area of lending we saw an opportunity to fill a gap in the market.
“Our products are only around 2 per cent over the average standard variable rate, which is a fair price for this market,” he said.
