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Non-residents have been hit with high interest rates and fewer options following the withdrawal of lenders from the non-resident sector over the past few years, says Allan Savins of Better Choice.
MPA spoke with the executive director about why the lender launched a new product for non-residents and what brokers need to know when helping foreign nationals and temporary residents apply for finance.
Demand for non-resident lending is strong
Despite international travel restrictions caused by the pandemic, there is still a significant market for non-resident lending in Australia, says Savins.
“According to the Australian Government Department of Home Affairs (as at December 2019) there were over 2.4 million temporary visa holder holders living and working in Australia,” he says.
“Additional interest by foreign nationals has also grown over the past several years, with keen interest in exploring the Australian property market given its stable economic status.
“Given the market has contracted within the Non-resident lending space, Better Choice Home Loans has taken the opportunity to fill the gap.”
Brokers have been left with few options
The lender has received consistent feedback from its brokers about the need for such a product given a current shortfall in supply, Savins explains.
“As multiple lenders have withdrawn from the non-resident lending space over the past few years, brokers have been left with very few options for their non-resident clients,” he adds.
“We have recently seen brokers having to use private lenders to settle loans for their non-resident borrowers at interest rates well in excess of 8%.
“Existing lenders have also failed to pass on full interest rate reductions over the past few years to their non-resident borrowers.”
The aim is that the new product will create an opportunity for brokers to re-visit non-resident clients with a genuine lending solution.
“We also have relationships with a number of brokers who have credit reps in overseas locations who are continuing to receive high demand from clients looking to invest in properties in Australia.”
The effect of non-residents on the market
Based on recent data from the ABS, new loan commitments for non-resident lending averaged at 272 loans, or $171m, per month in the six months to April 2020.
“Compared to the overall total new loan commitments average per month of approximately 31,100 loans, non-resident loans equate to approximately 0.08% of total loans,” Savins says.
“We don’t see non-residents having any major effects on the market. They are subjected to meet the same lending criteria as compared to a local borrower with a few additional requirements.”
What brokers need to know about financing non-residents
According to Savins, brokers need to be extra vigilant when it comes to meeting responsible lending obligations and providing translated documentation.
“Brokers will need to ensure that the application forms and all required supporting documents are translated by a NAATI approved translator,” he says.
It is also crucial to ensure the borrower understands the terms and nature of the loan as well as their repayment obligations despite any language barriers in play.
“Better Choice will be using a government interpretation service Translating and Interpreting Service (TIS) to assist in the verification process.”
Brokers must also ensure there is no conflicting objectives or mismatch between the borrower’s objectives and the product recommended.
In order to verify living expenses, brokers can use the Australian Household Expenditure Measure (HEM) and then convert Sydney HEM expenses using the international living expense conversion calculator www.numbeo.com.
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