Mortgage brokers are finding alternative sources of finance for their investor clients as the banks pull back on landlord lending with stricter serviceability requirements and higher LVRs.
Non-bank and specialist lenders are fast becoming the new funders of investor home loans.
Sydney-based broker and CEO of Multifocus Properties & Finance Philippe Brach told The Adviser that the group is shifting its strategies when setting up structures for its investor clients.
“We used to use the big four banks a lot as pricing and products were unbeatable,” Mr Brach said.
“Nowadays, we tend to shift some satellite loans to mortgage managers such as Mortgage Mart or AFM who are not taking deposits from the public and have access to funds from different sources at reasonable rates and at much better servicing levels,” he said.
Mr Brach provided one example of a client who is an experienced investor and wanted to finance his next property.
“He can borrow about $200,000 from the majors today, whereas using a mortgage manager who will take existing debt at actual repayments for servicing, he can borrow $800,000,” he said.
Smartmove co-founder and director Simon Orbell said his Sydney brokerage is already starting to use specialist lenders for investor loans.
“Just in terms of that more unique approach that some of the smaller players with a more nimble approach can take towards serviceability and some of the credit policies and niches they create,” Mr Orbell told The Adviser.
“We think that will only continue as lenders realign themselves and find out where those new niches fit.”
With the third-party channel adapting to pricing and policy changes, Mr Orbell said specialist lending is something that most businesses should be looking at a little more closely.
“Not necessarily for the non-conforming deals but more the specialist piece for investor,” he said.
“I think brokers really need to focus on re-educating themselves. I think there has been an element of comfort that has been created for a lot of the more experienced players in the market and I think we all need to take this as an opportunity to educate ourselves and our teams and make sure we’re looking at the alternatives out there to provide a better choice and solution for the end consumer.”
Last month, non-bank lender Liberty Financial told The Adviser that it is keen to capture investor demand and still has plenty of capacity to write mortgages for property investment.
[Related: Liberty keen to capture investor demand]
James Mitchell has over eight years’ experience as a financial reporter and is the editor of Wealth and Wellness at Momentum Media.
He has a sound pedigree to cover the business of mortgages and the converging financial services sector having reported for leading finance titles InvestorDaily, InvestorWeekly, Accountants Daily, ifa, Mortgage Business, Residential Property Manager, Real Estate Business, SMSF Adviser, Smart Property Investment, and The Adviser.
He has also been published in The Daily Telegraph and contributed online to FST Media and Mergermarket, part of the Financial Times Group.
James holds a BA (Hons) in English Literature and an MA in Journalism.
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