The cost of funding mortgages outside the big four just became measurably cheaper for one slice of the market. A broker-focused non-bank closed a $400 million residential mortgage-backed securities deal in late April 2025, supported by ten institutional buyers. It’s the lender’s first capital markets transaction at that scale.
The mechanics matter because non-banks typically fund loans through warehouse lines, short-term credit facilities from major banks, repriced every 30 to 90 days. Securitisation replaces some of that with longer-term debt sold to super funds, insurers and asset managers. When the pricing on that debt comes in tight, the lender’s blended cost of funds drops. The question for borrowers: does any of that saving flow through to advertised rates, or does it simply widen the margin?
The funding arbitrage non-banks are chasing
Warehouse funding typically costs a non-bank the bank bill swap rate plus 150 to 250 basis points, depending on the lender’s credit profile and the collateral mix. RMBS pricing for near-prime and specialist pools has ranged between 200 and 280 basis points over the three-month bank bill in recent transactions, according to debt capital markets data.
The appeal of securitisation isn’t always a lower headline spread, it’s term and certainty. A warehouse can be pulled or repriced; a securitisation is locked for the life of the notes, often two to four years. That stability lets a non-bank price loans with more confidence and potentially compete harder on rate without risking a sudden funding squeeze.
The deal in question backs a book spanning prime, near-prime and specialist mortgages, including full-doc and alternative-doc structures for individuals, companies, trusts and SMSFs. That breadth suggests the issuer is building a platform that can handle volume growth across risk segments without needing a separate funding vehicle for each product line.
The numbers that matter
- $400 million raised in debut RMBS transaction, April 2025
- 10 institutional investors participated
- Typical warehouse spread: bank bill + 150–250 basis points
- Recent RMBS spreads for similar collateral: bank bill + 200–280 basis points
- Non-bank mortgage market share: approximately 8% of new lending, up from 5% in 2020 (RBA)
Who benefits if funding gets cheaper
Borrowers in three scenarios see the most upside. First: self-employed applicants with clean credit but lumpy income, warehouse-funded non-banks often price those loans 50 to 100 basis points higher than prime owner-occupier deals to cover perceived tail risk. If securitisation lowers the blended cost, that gap can narrow.
Second: property investors using trusts or companies, where documentation and structure push them into specialist tiers. The rate differential between a major bank’s standard investor loan and a non-bank specialist product can run 150 basis points or more. Cheaper funding gives the non-bank room to chip away at that wedge without burning margin.
Third: borrowers refinancing out of higher-rate products taken during the 2021–2022 surge, particularly if their serviceability has improved but their bank won’t budge on pricing. Non-banks with stable, diversified funding can afford to compete harder for that cohort.
The risk: none of this guarantees a rate cut. If the lender’s priority is building capital buffer or cross-subsidising new product development, the funding benefit stays internal. Broker commission structures also matter, if a lender drops rates but doesn’t adjust trail or upfront, brokers may steer volume elsewhere.
What’s still broken in non-bank funding
Access to securitisation at scale doesn’t fix the structural asymmetry non-banks face. Major banks fund mortgages through deposits, which cost them roughly the cash rate minus 50 to 100 basis points on transaction accounts, and the cash rate plus 50 to 150 basis points on term deposits and savings. That’s materially cheaper than any wholesale funding a non-bank can access, even post-securitisation.
The gap matters most when the RBA is cutting. If the cash rate drops 50 basis points, a major bank’s deposit funding cost falls in lockstep. A non-bank with securitised funding sees no immediate benefit, the RMBS spread is locked, and the underlying bank bill rate only adjusts over time as notes roll. That lag creates windows where big banks can undercut aggressively and the non-bank has no margin to respond.
Liquidity is the other constraint. A $400 million raise sounds large, but it funds roughly 1,200 mortgages at an average loan size of $330,000. Compare that to the volume one major bank’s mortgage book writes in a single week. Scale still sits with deposit-funded institutions, and that scale translates to pricing power when credit conditions tighten or competitive intensity rises.
Timing and what happens next
The transaction closed as RMBS spreads have compressed modestly, investor appetite for Australian residential collateral remains strong, driven by low arrears (30+ day delinquencies at 1.1% across the sector, per latest APRA data) and an offshore bid from Asian and European asset managers hunting yield in stable jurisdictions.
If that bid stays firm through the rest of 2025, expect more non-banks to tap securitisation markets, either as debut issuers or follow-on transactions. The constraint will be pipeline, securitisation only makes sense if you’re originating enough volume to build a pool worth issuing. Broker-channel lenders with strong flows from aggregator relationships have the edge; smaller direct lenders or those reliant on referral partnerships will struggle to reach critical mass.
Two scenarios shift this materially. Upside: the RBA cuts another 75 basis points by year-end, serviceability loosens, and refinance volumes surge, non-banks with locked securitisation funding can price competitively into that wave without worrying about warehouse repricing. Downside: credit spreads widen (offshore recession, domestic arrears spike, or regulatory capital changes that penalise RMBS holdings), and the funding advantage evaporates, major banks’ deposit base insulates them, non-banks face margin compression.
The red flags borrowers should track
Cheaper funding doesn’t always mean better execution. Watch advertised rates over the next 90 days, if this lender’s pricing doesn’t budge despite the transaction, the benefit isn’t reaching borrowers. Compare like-for-like: a near-prime investor loan through this non-bank versus a comparable product from a peer still reliant on warehouse funding. If the spread doesn’t narrow, something else is absorbing the cost saving.
Settlement speed is the other tell. Securitisation gives a non-bank breathing room, but if loan-processing bottlenecks or credit policy tightens to protect the quality of the next pool, faster approvals vanish. Brokers will know first, if turnaround times blow out post-raise, the funding win hasn’t translated to operational capacity.
Finally: policy changes. If the non-bank adjusts serviceability floors, maximum LVRs, or acceptable income verification post-transaction, it signals the capital markets deal came with implicit tightening to satisfy noteholders. That trade-off, cheaper funding in exchange for narrower credit box, leaves some borrower segments worse off than before.
The practical reality
For most owner-occupiers with straightforward income and strong credit, this changes nothing, major banks will still offer the lowest advertised rates, and serviceability buffers at 3% assessment rates still constrain borrowing power regardless of who’s funding the loan.
The opportunity sits with borrowers who fall outside that prime box: self-employed, complex structures, investment portfolios across multiple entities, or recent credit events that don’t disqualify them but push them into specialist tiers. If this securitisation trend spreads, and it likely will, given current spreads and investor appetite, those segments see gradual rate compression over 12 to 18 months.
The next milestone to watch: whether this lender returns to market within six months for a follow-on transaction, and at what spread. If the pricing tightens further and origination volumes support it, the funding arbitrage becomes structural, not opportunistic. That’s when rate competition intensifies in the broker channel, and borrowers outside the big four’s prime box get a meaningful alternative.
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General info, not financial advice.
