- June 22, 2020
- Posted by: Ding Financial
- Category: Home Loans
Lending is a tough business. Regulations are tough. Scandals are rife. For the most par it would seems as though the odds are stacked against the lender in all aspects – consumer trust is down, loans are becoming more expensive to deal, and the economics of the market are shifting into ‘familiar territory’. But this couldn’t be further from the truth. Lenders, especially the Big Banks, are under pressure to tighten their lending policies to align with new regulations and expectations, and these actions have created a ‘squeeze’ in the market whereby both individuals and businesses are being shunned by the banks because they no longer fit the profile of their products.
Essentially, the lenders have found a way to divert the incidence of compliance and other penalties onto their customers. Sceptical maybe, but think about it; where else do lenders and banking institutions get their funds from? Just as the 3-6-3 expression goes – ‘pay 3 percent interest on deposits, lend money out at 6 percent, and tee off at the golf course by 3pm’. And this model makes sense (contextually and simplistically of course) because where else can people borrow from? Thankfully the market has adapted in this regard for the better.
Following the multiple phases of deregulation in the Australian financial system, new players have entered the market and with it has come the introduction of new types of products and services that target those areas of the financial system that don’t fit in with the policies of the Big Banks. This could not be a better opportunity for a broker and borrower to connect, as there are plenty of opportunities available to find competitive and accessible products that aren’t with the incumbent lenders. Whether you have been shunned because you are self-employed, work in a ‘risky business’, or just don’t have the financials to support your application, there is a general consensus that ‘neo-banks’ are disrupting the billions of dollars of lending that is occurring in the market. Of course, they don’t command the same market share or history and brand as traditional lenders, but given the tumultuous journey that the institutions have over the last few years, it makes borrowers question whether they should still show loyalty to the Banks after everything that has been revealed.