As non-bank lenders generally fund their operations through offshore investors, it was thought that they would be more vulnerable to the global credit squeeze.
Time has since proved the critics wrong, as non-bank lenders have demonstrated their ability to weather the storm.
The reality is that we have seen interest rate rises and falls from both bank and non-bank lenders alike. While banks predominately fund their home loans through their retail deposit books (the savings of their customers), they also supplement these deposits through offshore investors. This means that like non-banks lenders, banks are also impacted by the pricing in credit markets.
The degree of exposure to global funding (also known as wholesale funding) varies from bank to bank, just as it does from one non-bank lender to the next. Some non-bank lenders, for example, receive their funds from financial institutions rather than wholesale markets, which removes much of their short term funding risk.
Non-bank lenders have an important place in the mortgage market because they have increased the choice available to you as the borrower. If you were shopping around for a mortgage 15 years ago, your options would have been mostly limited to the four big banks. The emergence of non-bank lenders has seen better interest rates for home buyers and more innovative products appear on the market.
It’s a common mistake to confuse non-bank lenders (also known as mortgage managers) with finance brokers, when in fact their roles are quite different. While non-bank lenders go into the financial markets, obtain funds and then offer these funds to borrowers, finance brokers don’t actually source the funds themselves.
Our role as your finance broker is to work with a large panel of lenders to find a loan that best suits your needs. Because we have access to many different lenders and hundreds of home loan products, we can give you the security of sourcing loans that most closely match your personal financial situation.