If you were to summarise what the year 2024 looked like in the lending landscape in one word, surely one of the first things that would come to mind would be competitive. With the cash rate having held steady for the year, lenders have been busy focusing their efforts on differentiating their offering to mortgage brokers. The non-bank lending segment has been rapidly transforming its service proposition, rolling out new products, new technology, and more services to strike the balance between technology and personal service.

Their efforts appear to be paying off; according to Agile Market Intelligence’s Broker Pulse survey for October 2024, the proportion of brokers using non-banks rose to a two-year high in October, with 57 per cent of broker respondents saying they used at least one non-bank that month.

According to the report, the leading factor for using a non-bank is ‘client circumstances’, with brokers particularly enjoying the range of products and niches this segment offers.

In October, The Adviser hosted its Non-Bank Roundtable: Residential, bringing together eight leading non-bank lenders to find out how and why they’ve been innovating for the broker channel and discover the trends they’re seeing in the market.

Representatives at the roundtable were:

  • Royden D’Vaz, general manager – distribution and partnerships, Assetline.

  • Jason Azzopardi, CEO, Brighten.

  • Cory Bannister, senior vice-president – chief lending officer, La Trobe Financial.

  • Caesar Ibrahim, group manager – residential, Liberty.

  • Gabrielle Aoun, head of partnerships, MA Money.

  • Siobhan Williams, head of mortgages – retail broker, Pepper Money.

  • Chris Paterson, general manager, distribution & marketing, Resimac.

  • Belinda Wright, head of partnerships and distribution, Thinktank.

Noting the growing market share, Aoun, the head of partnerships at MA Money, says she believed it was because brokers understand non-bank products better.

“They’re more educated on what we can do and see we’re more commercial in how we look at things. For non-banks, the trend has been that because we’re able to look at things outside of the typical checklist approach and handle situations that aren’t quite standard, we’re growing market share,” she says.

Resimac’s Paterson agrees, telling the roundtable: “Customers can choose from many non-bank lenders, and are increasingly open to these options. This comes with being more educated on their financial options than they have been before due to increased amounts of information, either online or through their broker.”

A rising tide lifts all ships

With growing awareness and flows comes a growing urgency to deliver a seamless product, as Pepper’s head or retail broker says: “Peer group competition has certainly ramped up. It’s reached a point now where the non-bank sector has grown, and it is continuing to grow. So the amount of loans that we’re writing by percentage is greater, but the number of peers is also greater.

“I’ve noticed, particularly for the newer incumbents, a lot more diversity in their offerings. It’s not just price levers. It’s all about customer and broker experience.

“But with the change in the landscape, it’s now almost a challenge for us to ensure that in that non-bank space, you’ve got the best turnaround times, you’ve got speed to yes, and seamless experience. Because competition is fierce.”

Bannister, the senior vice-president and chief lending officer at La Trobe Financial, says: “The level of competition in particular, over the last three to six months has increased significantly, which is good. Just having more names and voices around this table is important for our industry as well. Having that level of competition is important for the growth of us all.”

Brighten CEO Azzopardi concurs, saying: “The main theme is how non-bank lenders servicing brokers has improved significantly. It feels as competitive as ever, with a lot of great brands (a lot around this table) who are servicing brokers very well.”

Thinktank’s Wright says: “The competition between-non banks has been extremely hot, and the speed at which change happens has accelerated. Non-banks are great at being agile and responsive, it has been a huge year in many ways.”

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Customised and niche offerings

A common theme that emerged was that non-banks have been adapting to market demands – whether through expanding product offerings (particularly for self-employed, investor, and self-managed super fund borrowers) or breaking into new lending segments.

But across the board, demand for higher loan amounts has risen. To keep pace with the rising property prices, several lenders have been increasing their maximum loan sizes to nearer the $5 million mark.

Thinktank’s Wright says: “I think it’s because house prices have been stronger than expected in Sydney, Adelaide, Perth and Brisbane. Melbourne’s obviously not as robust in some pockets in particular. So the demand for higher loan sizes is because of the value of the security itself.”

MA Money’s Aoun echoes this, stating: “People really need that capacity to lend more and meet serviceability,” while Ibrahim, group manager – residential at Liberty, says: “In terms of borrowing capacity, we’re seeing more people with confidence in their employment trying to skip that second home and go straight into the ‘ultimate home’. They’d rather stretch and see greater value. So, we’re seeing larger loan amounts and borrowing capacity, for sure.”

Non-banks are really filling that void that was left by the banks a few years back
- Siobhan Williams, head of mortgages – retail broker, Pepper Money

The borrowing capacity challenge has also resulted in a surge of SMSF lending, according to Williams, the head of mortgages – retail broker, at Pepper Money.

“SMSF certainly has been a big key growth area for us, and it comes down to that borrowing capacity piece. Australians still want to realise their dream of home ownership. For some, the only option that they can consider due to their current circumstances is SMSF, and for others it simply makes sense as an investment strategy for them within their super,” she says.

“Non-banks are really filling that void that was left by the banks a few years back.”

Others highlight that bridging loans have been growing in popularity as house prices rise, with La Trobe Financial’s Bannister saying the lender had seen a 20 per cent increase in this segment.

“You have people that want to upgrade or downsize, but we have a lack of stock in the market. Certainly listings, total listings, are still below decadal averages. So, there’s just not enough property on the market to allow for the smooth trade there once was,” he tells the roundtable.

Assetline’s D’Vaz echoes that the lender had seen “tailwinds” in bridging finance, saying that the lender had also announced a new construction product earlier this year, designed for developers, investors, or borrowers in metro locations who are needing to redevelop existing properties.

Lenders also say that more borrowers were facing financial stress, with arrears and defaults rising across the board and more looking to consolidate debts.

Paterson, the general manager, distribution & marketing at Resimac, says: “We’re seeing more customers fall outside the standard or traditional lending guidelines. With consecutive rate increases, these customers are looking at affordability and consolidating debts to help reduce their mortgage repayments. So we’re doing plenty of refinancing and debt consolidation.”

Ibrahim says Liberty Financial is also seeing a “fair bit” of debt consolidation now, adding that this phenomenon had been emerging over the past 18 months as the tax department chases debt paused over the peak of the pandemic.

“The banks don’t seem to serve these customers,” Ibrahim says.

“We’re seeing very strong businesses who may have used that cash flow to grow their business, as good businesses would do, not just sit on that money. So, to be able to consolidate debt for really good customers, get them back on track and help small businesses; we love doing that. We’ve seen a fair bit of that.”

Technology where it’s needed, humans at the core

Many emphasise the importance of improving the broker experience through innovations through online portals, secure document handling, and faster decision making through automation.

Brighten, for example, has gone live with a new origination system on Salesforce, rolled out a new core banking system (which helps brokers reduce any post-settlement experience noise), built a broker portal, and made ApplyOnline lodgements available to brokers in the past year.

“That’s going to be a game changer and brings us up-to-speed with our competitors,” the CEO says.

Liberty’s Ibrahim says: “What I’m excited about is our operations team not having to check things due to automation. That means a more engaged workforce and quicker service to brokers at the same time. We’re always asking: Is it better for the broker? Is it better for the customer? So more to come. It’s happening, and it’s happening very, very quickly.

“So, whether it’s CCR, CDR or open banking – we’re always keeping an eye on the developments that are happening, because you can be left behind quickly.”

Aoun says: “We’re all moving quickly at the moment, so for us, it’s about going one step further. It’s not just consistency, but also providing brokers enough tools up front to feel empowered in making a decision.”

However, several non-banks say the human element was still key. Resimac’s Paterson tells The Adviser: “Brokers and their customers have certain expectations around technology and the support this technology provides in achieving a decision quickly. We’ll continue to invest in this area, but as a non-bank, we’ll continue to focus on our BDM team and the experience of the BDM team helping brokers grow their business.”

Thinktank’s Wright says: “We do quite complex lending, and we don’t use credit scoring, so it’s about educating brokers up front, using the technology where we can to make ourselves faster, but also having that human element involved in helping the broker get the deal across the line as well.”

D’Vaz from Assetline says: “Technology is a great thing in the process side, but I hope it never replaces the high touch that we give our brokers – holding their hands, walking them through the process, navigating the back end, manoeuvring through all the nuances that lenders have. I hope that never dies. I think that’s a huge differentiator for the non bank sector.”

Brighten’s CEO echoes this, saying: “It’s using tech as an enabler to drive a competitive service proposition. I don’t believe you can totally automate in the non-bank space. For me, it’s always going to be a relationship and solution-based business.”

Pepper’s Williams further says: “There always needs to be a human element for credit assessment. But I think where technology belongs is either side of that – the application process, the doc signing process, ensuring that the customer is getting all the features, the bells, the whistles, the internet banking, that post-settlement journey that they’ve come to expect.”

Aoun agrees, saying: “Our customers are not bank clients and I think it’s important that while we harness technology, we don’t have that disconnect from human interaction. I’m personally a big advocate of that.”

New products and innovations

Looking to the new year, the non-bank lenders at the roundtable say they would continue to look at breaking into new niches and broadening their product range for brokers.

“Understanding what’s happening out there in the market from a customer sentiment point of view and listening to broker feedback, has helped us continually tweak and improve our offering to really speak to the current customer need,” Williams says.

Find out more about what the non-banks think 2025 has in store on page 32.