Already a subscriber?Smaller local lenders raised some $15 billion to deploy on mortgages that the major banks would not write last year, as they did not fit strict serviceability standards, restrictions that theirThat was a 30 per cent increase in just 12 months, with non-bank lenders already pricing in $4.45 billion in similar deals in the first three months of this year as wholesale funding markets spur into action and reduce capital costs for the non-bank sector.
Non-banks raised $15 billion last year in non-conforming RMBS deals, according to data compiled by Westpac. Non-conforming means that the loans collated in the security – which pays out interest like a bond would – did not meet normal bank lending standards. Still, with Liberty’s mortgage book shrinking, he said Liberty Financial was not seeing “a growing group of ‘unbanked’ customers”.
Banks are also seeing their cost of capital run higher as they refinance $188 billion of ultra-cheap government funding via more expensive sources, and competition for deposits ramps up.