Non-bank lenders in Australia are taking advantage of the growing sub-prime lending sector, a market that comprises low-doc loans and mortgages for borrowers with credit problems, who are ineligible for ‘prime’ loans, reported The Australian.
In particular, non-bank major lender Resimac is offering low-doc mortgages with up to 90 percent loan to value (LTV) ratio; while Westpac’s unit Rams is lending homebuyers up to 97 percent, after adding up the mortgage insurance premiums.
“We see more and more borrowers falling outside of what is considered ‘traditional’ lending guidelines,” commented Allan Savins, Chief Operating Officer at Resimac.
The latest loan products come as the Reserve Bank of Australia (RBA) in its recent semi-annual Financial Stability Review, had warned lenders against relaxing their credit standards further.
According to the RBA, business and household credit growth are expected to remain “fairly subdued” for some time due to low demand. This means banks could have a hard time in attaining the profits they had achieved during the credit boom in the last decade.
“In this environment it would be undesirable if banks responded by loosening their credit standards or imprudently shifting into new products or markets in a bid to boost their balance sheet growth,” added the RBA.
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