By:
Aaron Taylor Head
Head of non-standard lending, Bluestone Home Loans
It’s been a big couple of years. I think out of the back of COVID-19, there have been a lot of changes coming through from lenders in terms of policy and credit appetite. We saw things get a little bit looser and tighten again as monetary policy changes start to come through.
Now, we see higher interest rates and potentially higher mortgage stress in the industry. And we have started to see some of that more classic behaviour of customers in mortgage stress.
But there are also a lot of changes coming through in terms of the customer structure, the borrower, who they are, and the impacts for them.
We look at restrictions like those on company and trust lending and customers needing alternative options outside of the mainstream lenders.
You also look at the tax environment. The ATO has made a lot of changes over the last couple of years and is really starting to put pressure on customers with tax debt. My estimation would be there is around $70 billion outstanding right now in tax debt.
And then you flow through into the way customers are getting paid.
We’re starting to see a lot of people be self-employed. They’re taking ownership of their own pay, their own hours, their own contracts. There are a lot more independent contractors looking for ways to verify their income, which the banks don’t necessarily support all the time.
I think that mindset of specialist lending being just for credit-impaired customers.
For a lot of brokers that sit there and go, “Oh, I don’t deal with that type of customer.”
And my first reaction to that response is, “Okay, so do you not deal with customers that are self-employed? Or customers that have multiple investment properties or different income streams that are a little bit more complex to verify in line with the mainstream criteria?”
When you start to unpack it like that, you go, “I actually do deal with that type of customer.”
I think that mindset of specialist lending being just for credit-impaired customers
— Aaron Taylor, Head of non-standard lending, Bluestone Home Loans
It’s really understanding what has changed about the customer profile.
To be able to look at them today on paper and go, “They’re going to be able to afford this loan we’re putting them into for the next 30 years.”
It’s the next 30 years that matters, not what got them to this point. It’s making sure that we’re comfortable with them to be able to pay this loan going forwards.
I think keeping in touch with borrowers is going to be key for brokers and keeping up to date with some of these policy changes that come through from lenders.
I would say just do a constant re-evaluation. Every three or six months, review who your lenders are. What are the policies and why are you going there? What are the types of customers you’re going there for and are they still the best home for that customer?
I think keeping in touch with borrowers is going to be key for brokers and keeping up to date with some of these policy changes that come through from lenders.
— Aaron Taylor, Head of non-standard lending, Bluestone Home Loans
I hope interest rates don’t go too high, and we don’t see customers facing that negative space of struggling with repayments. We are seeing more defaults pop up now in the short-term credit space. Ideally, we’ll be able to start to see some lower interest rates next year.
We’ll hopefully see some businesses really start to grow. We look at all these self-employed people that have come out over the last 12–18 months, and next year and the year after, hopefully, we’ll see some really good tailwinds for them. That’s when the alt-doc space will really take off.
It’s no longer just about a residential transaction either. I look at our product suite over the last 12 months, we’ve added products for expats and people living overseas and investing back into Australia. You have construction in the alt-doc space now really starting to step up, and we’re seeing more and more lenders stepping into the commercial property space.
Diversification is often used to be a bit of a buzzword. For me, it’s about being able to work with the same customer across a range of different solutions.
Tune in to hear more!
Find out more about how the specialist lending landscape is evolving, in the In Focus podcast episode, ‘Why the specialist borrower isn’t who you think’, here:
Aaron Taylor Head
Head of non-standard lending, Bluestone Home Loans
Bluestone Home Loans
Bluestone Home Loans has helped thousands of customers with a variety of financial needs.
As one of Australia and New Zealand’s leading non-bank mortgage lenders, we specialise in providing home loans to the borrowers the banks often overlook.
Since 2000 we’ve been here for those that are capable of the remarkable, those brave and curious enough to start their own businesses, who have incredible aspirations and those with unique paths but are still determined to create a fantastic life… and we believe that this shouldn’t get in the way of them owning their own home.
3 min read