Powered by MOMENTUM MEDIA
the adviser logo
Lender

Gig economy driving demand for self-employed home loans

by Tas Bindi5 minute read
demand self employed home loans green houses rising economy increase

A non-bank lender has recorded a 20 per cent increase in demand for specialist home loans in the first half of FY2018.

Homeloans Ltd believes that the demand for its self-employed products, such as FlexiChoice and Accelerate, is driven by Australia’s growing gig economy and rising number of small businesses.  

The non-bank lender cited figures from the Australian Bureau of Statistics which show that nearly 17 per cent of the nation’s workforce is self-employed. Additionally, the 3.1 per cent increase in the number of active businesses in 2016–17 (to 2.24 million) is due to the growing number of non-employing businesses or independent contractors.

“A common trend we’re seeing is career professionals making the switch from employment to self-employment within their same field of expertise, often driven by a desire for more flexible hours and a better work/life balance,” Homeloans’ general manager of third-party distribution, Daniel Carde, said.

Advertisement
Advertisement

The non-bank lender said that it sees a strong growth opportunity within the self-employed market at a time when many other lenders are reluctant to offer home loan products to this customer segment. Mr Carde explained that the reason self-employed people struggle to secure home loans is primarily because they’re unable to provide the traditional financial statements required by most lenders.

“We take a more flexible approach and base our lending assessments on documents such as bank statements, business activity statements or accountant letters, which are extremely current,” the general manager of third-party distribution added.

“What we’re finding is these documents actually provide a more up-to-date and detailed picture of a borrower’s financial situation — unlike tax returns which can be almost a year or more out of date.”

Mr Carde noted that increased flexibility does not mean loose lending criteria.

“There’s no difference between a full documentation loan and an alternative documentation loan when it comes to the lending assessment,” Mr Carde said.

“All income verification, irrespective of what has been provided, documents undergo the same levels of scrutiny and due diligence. And if in doubt, we always seek further information.”

The general manager is also eager to debunk the “myth” that interest rates for self-employed home loans are generally higher, noting that Homeloans’ rates start at 4.54 per cent.

“The interest rates vary depending on the LVR, the type of income verification provided and whether the borrower has any credit impairment or not. But for a self-employed borrower who has full financial statements available, the interest rate is the same as a PAYG borrower,” Mr Carde said.

Earlier this year, the non-bank lender revealed that its loan settlements had risen by 27.5 per cent in a year to $2.2 billion by 31 December 2017.

Homeloans reported a net profit after tax of $11.9 million in the first half of FY2018, aided by loan settlement growth and its 2016 merger with RESIMAC.

Its half-year financial results further showed that its loan book grew by 31 per cent from the previous corresponding period.

In addition, total principally funded loans and advances grew by 31 per cent to $7.6 billion, with total assets under management also increasing by 18.1 per cent from the previous corresponding period to $11.1 billion.

Last month, Homeloans announced that its chief financial officer, Ian Parkes, resigned after six years of working for the non-bank lender. 

[Related: Homeloans settlements surpass $2bn]

housing up

Tas Bindi

Tas Bindi

AUTHOR

Tas Bindi is the features editor for The Adviser magazine. 

JOIN THE DISCUSSION

You need to be a member to post comments. Register for free today

MORE FROM THE ADVISER

CEO Sleepout Pepper Money

Mortgage industry raises more than $160k in CEO Sleepout

On 23 June 2022, several CEOs and directors in the mortgage and finance industry spent a night without shelter to...

READ MORE
alex whitlock

New membership program revealed for The Adviser

Members will be able to access exclusive sales and marketing strategy, business intelligence and exclusive market...

READ MORE
Hot property TA

Hot Property: The biggest property headlines from the week 27 June to...

Welcome to The Adviser’s weekly round-up of the headline stories and news that are important not only for the...

READ MORE
magazine
Read the latest issue of The Adviser magazine!
The Adviser is the number one magazine for Australia's finance and mortgage brokers. The publications delivers news, analysis, business intelligence, sales and marketing strategies, research and key target reports to an audience of professional mortgage and finance brokers
Read more