Everyone knows what a bank is – but ask someone to define a non-bank lender, and the answer becomes a lot murkier. That’s because the non-bank sector is incredibly broad, covering a wide array of business models, from large private investment lenders to securitised funders to peer-to-peer platforms and superannuation-backed credit providers.
This diversity makes the segment difficult to pin down – so much so that it doesn’t even have a common name to describe what it is, only what it isn’t.
Non-bank lenders – also known as non-ADIs – are financial institutions that provide loans, but do not hold an Australian banking licence. Unlike banks, they do not accept deposits and are instead funded by wholesale markets or securitisation. Well-known names in the residential space include Liberty, Pepper Money, Resimac, Firstmac, and La Trobe Financial, among others.
According to the RBA’s Financial Stability Review of 2019, there were around 600 non-bank lenders operating in Australia, encompassing a wide variety of providers specialising in everything from residential mortgages and personal loans to commercial, equipment, and asset finance.
Unsurprisingly, given the opacity of defining the segment, it makes it challenging to source clear, consistent data on the true size and shape of the non- bank lending market. But what we do know is that the sector’s market share has gradually increased in recent years.
As noted by both APRA and the Reserve Bank of Australia (RBA), the share of new housing lending undertaken by non-bank financial institutions has steadily risen – to be around 6 per cent in April 2025, up from 5 per cent in 2023.
The RBA has noted that non-banks, while still only accounting for a minority of lending overall, play a critical role in “filling gaps” in the market. They are key to providing more bespoke lending solutions, particularly among borrowers who fall outside the traditional credit boxes.
Indeed, flexibility is the cornerstone of the non-bank proposition. Brokers often cite non-banks’ willingness to lend to underserved segments – including self-employed borrowers, credit-impaired clients, and those requiring alternative documentation or unique structuring – as a key reason for turning to these lenders.
According to the 2025 Broker Pulse Third-Party Lending Report, conducted by Agile Market Intelligence, non-bank lenders made up a record 28 per cent of all lenders used by brokers surveyed – the highest proportion ever recorded (see page 9 for more).
This marks a notable rise from 23 per cent in 2021, highlighting how the broker channel is increasingly turning to lenders outside the big banks to get deals across the line.
Why brokers turn to non-banks
“Non-banks are often more agile and open-minded in their credit assessments,” one broker noted in the survey.
“They’re problem-solvers and are focused on how a deal can work, not just why it doesn’t fit policy.”
Many non-banks have also invested heavily in their business development manager (BDM) support and service, earning praise for being responsive, hands-on, and genuinely engaged in helping brokers find a path to approval for their clients.
In a market where speed, customisation, and clarity are crucial, these attributes have helped non-banks cement their position as key partners in the broker toolkit.
The trade-offs: Cost and complexity
However, non-bank lending isn’t without its challenges. One of the most cited concerns is cost. Interest rates offered by non-bank lenders are typically higher than those from major banks, often reflecting the perceived risk of the borrower profile or the funding structures of the lender/risk appetites of the private investors.
On top of this, borrowers can face significant upfront and ongoing fees, including application charges, risk loading, and higher valuation or legal fees.
Some brokers have also pointed to process inefficiencies as a deterrent. While many non-banks excel in flexibility, the trade-off can be slower turnaround times, inconsistent communication during the assessment process, and difficulty in navigating less automated systems.
“There can be delays and a lack of clarity around what’s required, especially for complex applications,” one survey respondent noted. “That’s frustrating when clients are time-sensitive.”
A tailored fit
Despite these drawbacks, the value proposition of non-bank lenders appears to be resonating more strongly than ever in 2025.
As borrowers become increasingly diverse – with gig economy workers, small-business owners, and property investors seeking more nuanced lending solutions – the need for alternatives to the one-size-fits-all model of the banks is becoming clear. Non-banks are stepping into that space, offering not just credit, but credit that fits.
For finance and mortgage brokers, the rise of non-bank lending represents both an opportunity and a responsibility: to ensure they are fully across the wide array of products, processes, and pricing structures available in the market and to guide clients towards solutions that meet their needs, even if they come at a premium.
As one broker succinctly put it: “Non-banks may not be the cheapest option, but when a client needs a deal done and no one else will do it – they’re often the ones who get it across the line.”
