Background to the non-conforming loan market
Over recent years, new participants have entered Australia's lending market offering loan alternatives for those borrowers who don't qualify for standard home loans from the mainstream lenders such as banks, building societies, credit unions, finance companies and mortgage originators.
This alternative market is also called the ‘sub-prime lending' market. In the past there were limited choices for borrowers like the self-employed or those with a poor credit history. Finance companies and solicitor-backed loans were the only options.
Out of the non-conforming market has also sprung the ‘low-doc' loan, offered to self-employed borrowers and others who are unable or unwilling to supply full documentation of their income. Low doc loans have exploded since 2003 with both non-conforming and mainstream lenders adding them to their loan product range. Some estimates suggest that they now account for 10 per cent of all new home loans. Low doc loans are now really a mainstream home loan option.
Other categories of the non-conforming market include loans for those with a poor credit record and new arrivals in Australia, non-residents and retired borrowers.