Some property investors may have been spooked by recent decisions by the Australian Prudential Regulatory Authority (APRA) which seeks to curb lending to property investors. But, for investors, every cloud has a silver lining.
With many banks now turning their back on property investors, savvy investors are returning to a source of funding they used heavily in the mid ‘90s – non bank lenders.
Non-bank lenders are not directly governed by APRA so are still able to offer the more generous lending policies the banks are now withdrawing.
Non-bank lenders get their funds from the money markets – often overseas. With interest rates in Tokyo, London and New York lower than they are in Australia, non-bank lenders can often offer rates that are comparable with those offered by banks over here.
This could be a second-wind for property investors and non-bank lenders who really attacked the banks in the 1990s. Then they often offered rates one to two per cent below the banks and ultimately forced the banks to reduce their margins and the rates they offer for property finance.
In addition, because these property investors use mortgage brokers, they were able to provide a higher quality service than the banks typically offered.
Everything goes in cycles, and now the non-bank lenders are again able to be nimble and provide the answer that borrowers require with products and lending policy to fill the gap the banks have left with their overreaction to APRA’s instructions.
If a property investor’s bank won’t give a reasonable or comparable interest rate, they may want to talk to a broker about non-bank lenders who could be the key to them building an investment portfolio.