The money we borrow from the banks is often not actually their own money. Often it is money they have borrowed and then (legitimately) lent to us at a profit.
“Boring as batshit” I hear you say. But, actually, where this money comes from could have the biggest impact on Mum’s and Dad’s loan repayments. And there are some recent changes that could mean smaller lenders can take on the big banks – giving you and I a better deal.
Often, when we borrow money from a bank, they are (legitimately) lending to us the money from someone’s savings account. Or they have issued what is called a Residential Mortgage-Backed Security (RMBS) – where institutional investors have loaned them a truck-load of money to offer mortgages.
According to the Australian Bureau of Statistics (ABS), there has now been $114bn lent in RMBS . This was an increase of $1.4bn on the previous month.
Periods when there is significant RMBS lending are when alternative lenders can really take on the Big Four and give us very sharp rates. In 2007 there was $20bn in such lending when lenders like Wizard and Aussie could really take on the banks.
While we are a long way from those heady days, when it was easier to get credit, there are early signs that there are some lenders who are being very competitive. This week, Pepper announced a 77 per cent in lending growth – money lend to property owners like you and I at competitive rates.