A mid-sized non-bank has just announced policy changes that put numbers to a trend the broker channel has been tracking for months: non-banks are leaning into larger loans, higher LVRs and faster turnarounds as borrowers who don’t fit bank serviceability calculators look elsewhere.
The changes are effective immediately. Maximum LVR on prime full-doc and alt-doc loans up to $5 million has lifted from 75% to 80%. Vacant land LVR moved to 80% as well. Metro properties in category 1 postcodes can now use automated valuations instead of physical inspections for loans up to 80% LVR and $2 million. Regional loan caps in category 3 locations doubled from $500,000 to $1 million.
These aren’t cosmetic tweaks. They directly expand borrowing capacity for self-employed borrowers, trust and company structures, expat scenarios and SMSF property purchases, segments where banks typically apply conservative overlays or decline outright.
The firm behind the changes has grown its loan book 127% to $7.5 billion in the first half of the financial year and has since crossed $8 billion after more than $1 billion in new settlements in the opening months of the second half. That’s not market share creep. That’s repositioning.
The mechanics behind the shift
Non-banks don’t take deposits, so they don’t face the same regulatory capital requirements as ADIs. That structural difference allows faster policy pivots and more flexible credit assessment, especially when funding costs are stable and competition for quality deals intensifies.
The change to automated valuations matters because it cuts approval time and removes a friction point on straightforward metro purchases. The increase in regional loan caps is more significant than it looks: it opens up regional investors and upgraders who were previously forced into second-tier lenders or forced sales to stay under the cap.
The LVR lift to 80% on larger loans changes the equation for borrowers with equity but complex income. A self-employed borrower with $1.5 million equity in an existing property can now access $6 million in total debt at 80% LVR through a non-bank, whereas a bank might cap them at 70% or require a guarantor.
How non-banks are taking share from banks
ABS lending data shows non-bank home loan issuance surged 65.2% to $10.49 billion in the June quarter, up from $6.35 billion a year earlier. Major bank lending grew 2% in the same period.
That gap reflects two forces. First, banks are still applying post-Royal Commission serviceability buffers and are slower to adjust policies when rates plateau. Second, borrower profiles have become more complex: bonus and commission income, contractor work, offshore earnings, trust structures, previous late payments now cleared.
Non-banks assess those scenarios on merit rather than running them through automated credit scoring. That doesn’t mean looser credit, it means manual underwriting that weighs actual cashflow, asset position and exit strategy instead of applying blanket rules.
The trade-off is rate. Non-bank variable rates typically sit 50 to 150 basis points above equivalent bank products, depending on LVR and documentation type. For a borrower who can’t access bank credit at all, that’s not a trade-off, it’s the only option. For a borrower who could get bank approval but wants faster settlement or higher leverage, it’s a conscious choice.
Pressure points in non-bank growth
Non-banks fund through warehouse facilities and securitisation, not deposits. If wholesale funding costs spike or investor appetite for mortgage-backed securities weakens, non-banks lose their rate advantage and have to either raise prices or pull back volume.
That hasn’t happened yet. Securitisation markets have been stable through 2025 and early 2026, and non-banks with strong loan performance and diversified funding sources have maintained competitive pricing.
The second risk is credit quality. Non-banks are writing loans to borrowers who don’t meet bank criteria. If unemployment rises or property prices fall sharply, those loans are the first to show stress. Non-banks with conservative LVRs, strong serviceability buffers and experienced credit teams will weather that better than those chasing volume.
The third constraint is operational. Rapid growth requires underwriters, BDMs, compliance infrastructure and technology that scales without losing turnaround speed. The non-bank in question has invested in broker-facing tech and hired credit analysts with deep non-bank experience, but not all competitors are doing the same.
The catch
Non-bank loans typically come with higher rates, and some include early exit fees or require a clear refinance path within 12 to 24 months. If you’re using a non-bank to bridge a short-term serviceability gap or close a time-sensitive purchase, that’s fine. If you’re treating it as indefinite financing without a plan to refinance or pay down, you’re locking in a higher cost of capital with less rate certainty than a bank.
What it means for borrowers and brokers
If you’re self-employed, earning variable income, or holding property through a company or trust, the gap between what a bank will lend and what you can actually service has widened. Non-banks are filling that gap, and the policy changes above make it easier to access higher leverage without needing perfect payslips.
For brokers, non-bank growth is both an opportunity and a responsibility. The opportunity is getting deals done that banks won’t touch. The responsibility is explaining the rate differential, the exit strategy, and the funding risk to clients who may not understand why a non-bank approved them when a bank didn’t.
The SMSF lending segment is particularly active right now, following recent changes to residential lending rules for self-managed super funds. Non-banks with flexible SMSF policies and fast credit decisions are picking up volume from funds that can’t wait three months for bank approval. For more on how that shift is playing out, see SMSF commercial property shift accelerates as residential lending ban bites.
Borrowers upgrading or investing in regional markets should check category definitions carefully. A postcode shift from category 2 to category 3 can halve your maximum loan size under some lender policies, even if the property and your income are identical.
What to watch over the next six to twelve months
Whether securitisation spreads widen. If non-bank funding costs rise, expect rate increases or tighter LVR caps within weeks, not months.
Whether banks respond with policy loosening of their own. If major banks see broker market share eroding to non-banks, they may relax overlays on self-employed income or complex structures. That would compress non-bank rate margins and force differentiation on speed and service rather than credit flexibility.
Whether non-bank loan performance holds. Early arrears data through 2025 has been stable, but the next real test is a rising unemployment cycle. Non-banks with conservative underwriting will gain trust and funding access. Those that chased volume will contract.
If you’re looking at non-bank finance, ask your broker for a written breakdown of rate, fees, exit terms and a realistic refinance timeline. If the answer is vague or the exit path relies on speculation about future property prices, keep looking.
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General info, not financial advice.
