Non-bank borrowers at the pointy end of mortgage stress
Borrowers with a mortgage at a non-bank lender are more stressed than those with major banks and regulators will step in if they pose a “broader systemic risk” to the financial system, the prudential watchdog says.
Australian Prudential Regulation Authority chairman John Lonsdale said a tick-up in loan arrears at non-bank lenders had caught the watchdog’s eye, as he promised a broad-based review of the financial sector to make sure it could withstand a Silicon Valley Bank or Credit Suisse-like collapse.
John Lonsdale reassured that non-performing loans were still “at a very low levels” across the economy. Getty
Mr Lonsdale said that although he does not regulate non-banks, “we are looking at the risk and APRA does have some tools at its disposal if it feels there are broader systemic risks”.
While 30-day arrears and above at major banks were rising off a historically low base and “running at about 0.7 per cent” of their residential mortgage books, Mr Lonsdale said “that is not the case on the non-bank side”.
“When we sit around the table at the Council of Financial Regulators every quarter, it is a risk we look at,” he said. “You are seeing more stress than what you are certainly at the major banks.”
The comments came as APRA revealed its corporate plan and priorities for the 2024 financial year, and off the back of a trio of results that showed the challenges facing the non-bank sector.
Pepper Money last revealed 1.2 per cent of its mortgage portfolio was 90 days overdue on payments. Liberty Financial said about 1.5 per cent of its home loan portfolio was in the same boat, while Resimac on Tuesday revealed it had provisioned away about $42.4 million for loan losses as of June 30.
These 90-day delinquencies rates are
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