How non-bank lenders can boost your borrowing power
For many Australians, securing finance through the banks has become increasingly difficult, with strict lending rules often leaving borrowers frustrated by how little they’re eligible to borrow. Even those with solid incomes and good credit histories can find their borrowing power capped.
This is largely due to regulations enforced by the Australian Prudential Regulation Authority (APRA), which require authorised deposit-taking institutions (ADIs) to hold strong capital reserves and apply rigorous checks on loan applications. While these safeguards protect the financial system, they can also limit access to finance for everyday buyers and business owners.
The role of non-bank lenders
This is where non-bank home loans, or non-ADIs, come into play. Although they account for just 6% of financial system assets, their market share of housing and business lending has been growing steadily. Unlike ADIs, alternative home loan lenders are not bound by the same prudential requirements, which gives them greater flexibility in how they assess loan applications. For borrowers, this can mean a very different outcome when applying for finance.
Serviceability buffers and borrowing power
One of the most important differences between ADIs and non-bank lenders is how they calculate serviceability. Banks apply a 3 percentage point buffer to test whether a borrower could still afford repayments if interest rates were to rise. Many non-bank lenders apply only a 1 percentage point buffer – and some apply no buffer at all on existing loans.
To put this into perspective, an $800,000 loan over 30 years at 6% interest has monthly repayments of about $4,796. With a 3 percentage point buffer, banks test at 9%, lifting repayments to approximately $6,437. A non-bank lender using a 1% buffer would test at 7%, which would equate to around $5,322 a month.
These changes alone can substantially increase borrowing capacity, allowing a buyer to secure a more suitable property or giving an investor room to grow their portfolio when the banks say they have reached their limit.
Small business finance options
The flexibility of non-bank lending isn’t limited to property loans. Small businesses, facing higher costs and slower demand, often find banks unwilling to lend under these conditions. Non-bank lending can provide funding with faster approvals and less rigid eligibility criteria, sometimes making them the only option to manage cash flow or keep operations running.
That said, the NSW Small Business Commissioner notes that borrowers need to carefully weigh the benefits against trade-offs like higher rates or shorter repayment terms.
Why work with a broker?
For anyone navigating these choices, the right advice is critical. Working with an experienced Mortgage Broker in Sydney ensures you can compare both bank and non-bank lenders, weighing flexibility against cost and risk.
As one of the best brokers Sydney has to offer, Eventus Financial provides access to a wide panel of lenders and the expertise to help you make an informed decision. Whether you are buying your next home, expanding an investment portfolio or seeking business finance, a trusted finance broker in Sydney can open the right doors.
Looking to increase your borrowing capacity? As an award-winning mortgage broker in Sydney with more than 300 five-star Google reviews, Eventus Financial can help. Schedule a no-obligation consultation with Alex today to explore your options.