Powered by MOMENTUM MEDIA
subscribe to our newsletter

Investment boom opens new gap in lending

The hot residential investment market has exposed a new niche lending segment that specialist lenders and brokers are yet to capitalise on.

Residential investment lending soared over the 12 months to May. Property investment loans accounted for 40 per cent of all AFG mortgages sold in May this year, up from 36.5 per cent in May 2013, according to the AFG Mortgage Index.

But while vanilla lending for investors is booming, funding gaps are opening up in other sectors of the investment market.

RedZed managing director Evan Dwyer said one of the “gaping holes in the market” at the moment is financing for small residential developers.

“Those guys who are specialists at doing two dwellings on one block – they can’t get finance at the moment,” Mr Dwyer told Mortgage Business.

Advertisement
Advertisement

“There are still gaps that just aren’t being filled,” he said.

While competition heats up in the major bank-dominated prime mortgage space, Mr Dwyer said he intentionally chose not to compete in a market of “commodities”.

“Prime mortgages are commodities, and generally the person who wins in the commodities game is the person with the lowest cost of production,” he said.

“That is why I don’t compete in the prime space against banks – they will win that battle.”

Outside of prime mortgages, borrowers with more complex needs are finding it increasingly difficult to secure finance as the banks focus on core residential home lending, Mr Dwyer said.

PROMOTED CONTENT


“Those people are now going to brokers, not to their banks,” he said, adding that brokers are identifying the complex needs of borrowers who require more specialist products.

“I want to make sure I have that commercial mortgage sitting there so that when that broker gets that conversation going he knows he can send that particular deal in its entirety to me.”

Mr Dwyer said that the industry consistently treats commercial loans as something different to residential loans; while the products may vary, the demand for them all comes from the same customer, he said.

“None of us actually realise this, but it’s the same borrower,” he said.

“If you think about the person asking for the money, I don’t know why you would treat that person differently just because they gave you commercial security or residential security.”

By putting people before product, Mr Dwyer said his company has successfully expanded into the small-tier commercial space.

 

Investment boom opens new gap in lending
mortgagebusiness

Latest News

The government has been told to develop a complaints process for businesses that have been dumped by their banks, following accusations of a...

An Australian fintech has introduced a new self-service VOI product for the mortgages market. ...

With low interest rates and income support expected to soon disappear, the major bank has released a revised dwelling figure. ...

Join Australia's most informed brokers

Do you know which lenders are providing brokers and their customers with the best service?

Use this monthly data to make informed decisions about which lenders to use. Simply contribute to the survey and we'll send you the results directly to your inbox - completely free!

Do you think APRA's bank buffer changes will see more borrowers use non-banks?

Website Notifications

Get notifications in real-time for staying up to date with content that matters to you.