Non-banks head to Canberra over loan funding

Smaller lenders argue for a piece of the $200 billion pie

Non-banks head to Canberra over loan funding

Non-bank lenders crowded Canberra’s Parliament House early this week to argue to the treasurer that the big banks are getting an unfair advantage in the mortgage market.

Non-bank lenders argue that they’re not facing a level playing field due to the majors’ access to ultra-cheap funding put in place in response to the COVID-19 pandemic. Deposit-taking banks can access the Reserve Bank of Australia’s $200 billion Term Funding Facility, which was put in place to ensure that credit continued to flow during the pandemic. When the RBA slashed the cash rate to a record low of 0.1% last month, it also said the rate on drawing from the TFF would be reduced to 10 basis points.

Non-banks argue that the cheap funding for DTIs means that banks have an unfair competitive advantage. Non-banks themselves cannot access the funds because they do not have RBA settlement accounts.

Read more: Non-banks urge revamp of TFF criteria

Representatives of non-banks held closed-door meetings with officials in Canberra, arguing that the COVID-19 measures needed to be more neutral to competition, according to a report by The Australian Financial Review.

There were also discussions about potential solutions. One possibility is for the Australian Office of Financial Management to offer warehouse funding to non-banks at the same rate the banks get.

Whether Treasurer Josh Frydenburg acts to address non-banks’ grievances remains to be seen, especially since the country seems to be emerging from the pandemic faster than expected. The last day for drawdowns under the TFF is June 30, and the banks have already been inundated with deposits, AFR reported. That means there’s not much need to extend the TFF’s time frame, unless there’s a drastic change in the pace of recovery.

The latest discussions included non-banks Mortgage House, Resimac, Columbus Capital, Firstmac, and mortgage broker AFG. The Australian Securitisation Forum and FinTech Australia are also involved in the funding push.