Non-conforming loans take off in Oz

Lending commitments in the non-conforming mortgage market in Australia grew 500%, from A$1.4 billion in 1999 to A$8.4 billion in 2003, researcher Datamonitor says.

Friday, November 26th 2004, 3:23AM

While it only accounts for 4.2% of total lending commitments, Datamonitor predicts a bright future for non-conforming mortgage lending in Australia.

"The market is destined to expand as existing lenders boost awareness of their product and brand, broker understanding of non-conforming mortgage lending continues to grow and entrants from the mainstream mortgage market acquire a presence in the market."

By 2008 lending commitments in the non-conforming mortgage market will amount to A$20.4 billion, equivalent almost 9% of total lending commitments.

Datamonitor estimates that the Australian non-conforming population included 2 million individuals in 2003, accounting for just over 10% of the country's population.

Up to a quarter of loan applications are rejected by mainstream lenders each year and up to 25% of these rejected applications are then taken up by non-conforming lenders.

Specialist players account for the bulk of non-conforming mortgage lending
The roots of non-conforming mortgage lending in Australia lie among solicitors, accountants and property developers.

Since 1999 solicitors and accountants have become a less important source of finance due to the market entry of specialist players such as Liberty Financial, Bluestone Mortgages, Pepper Home Loans and GE Money.

"These players now account for the bulk of the non-conforming mortgage lending and have gained a strong market position because they have been able to advertise nationally, utilise national broker networks and offer products that are priced more competitively."

Datamonitor believes that the non-conforming mortgage market is destined for rapid growth as existing lenders increase awareness of their brand and products, broker understanding of non-conforming lending continues to grow, mainstream lenders tighten their lending criteria and there is further competitive entry into the non-conforming market.

By 2008 lending commitments in the non-conforming mortgage market will amount to A$20.4 billion, equivalent to 8.7% of total lending commitments.

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