What is a non-bank lender?
Non-bank lenders are institutions that don’t have a banking licence but still offer credit products, like mortgages and other loans. That means they can’t keep customer deposits (money kept in savings accounts, term deposits, and offset accounts), so they have alternative sources of funding for their loans.
How do non-bank lenders fund their loans?
There are a few different ways non-bank lenders might get the money they lend to customers:
- Institutional investors
Non-bank lenders might share a portion of the interest charged on a home loan with an investor (often another financial institution), who provides the cash to fund said loan. - Corporate bonds
This is essentially a loan, with the bond issuer (in this case, a non-bank lender) selling bonds to raise money and promising to pay it back, plus interest, at a set point in time. - Selling mortgage-backed securities to investors
This essentially sees a non-bank lender bundling a number of mortgages together and selling that ‘package’ to investors, who receive a portion of the interest home loan borrowers pay on their mortgages.
Do non-bank lenders have lower rates?
There’s a huge range of lenders in Australia, both banks and non-banks, and it’s worth comparing rates from a wide variety of home loan providers on the market.
As a general guide, among non-bank lenders in the Canstar database, the average variable home loan rate was 6.25% p.a. in late August, compared to 6.67% p.a. for banks (otherwise known as Authorised Deposit-taking Institutions (ADIs)).
Average variable and fixed home loan rates ADIs v non-ADIs
Variable | 1 year fixed | |
|---|---|---|
ADI | 6.67% p.a. | 6.41% p.a. |
non-ADI | 6.25% p.a. | 6.56% p.a. |
Source: Canstar - 24/08/2026. Based on owner occupier home loans on Canstar's database, available for an 80%LVR, $600k, P&I loan; excluding introductory and other special condition loans.
According to Canstar’s mortgage calculator, the 0.42% p.a. interest rate difference between 6.67% p.a. and 6,25% p.a. could trim $157 off the monthly repayments on a $600,000, 25-year home loan.
What are the best non-bank lenders in Australia?
There's no one 'best' non-bank lender operating in Australia. Each lender will have it's own product suite, service offerings, and technology tools, and the best one for you will depend on your needs and budget.
If you’re in the market for a low rate home loan, you might want to consider Canstar’s Home Loan Award winners, which have been recognised to offer outstanding value to mortgage borrowers.
Canstar’s 2026 Home Loan Awards: Winners of our Outstanding Value Awards for home lenders: Australian Mutual Bank, BankVic, Hume Bank, Pacific Mortgage Group (PMG), People’s Choice (now part of People First Bank), Unity Bank, and Up Bank.
Of those, Pacific Mortgage Group is a non-bank lender.
How safe are non-bank lenders?
Non-bank home loan lenders are regulated by the Australian Securities and Investments Commission (ASIC) and must abide by the National Credit Code. They have to hold an Australian Credit Licence (ACL) and are governed by many of the same responsible lending laws as banks.
As long as the non-bank lender you’re considering has an ACL, it will generally be safe and reliable.
Who are non-bank lenders suitable for?
Non-bank lenders generally aim to compete with banks for home loan customers, so they may be worth thinking about whatever your circumstances.
Some borrowers may find non-bank lenders take advantage of less stringent regulations to offer more flexible loans than banks. For example, non-bank lenders don’t have to assess loans using the 3% serviceability buffer (banks must add 3% to your interest rate when checking if you can afford a mortgage), so you might be able to get approval for a larger loan with a non-bank than with a bank.
A 2023 RBA paper found non-bank lenders "help to finance some forms of economic activity that might otherwise go unfinanced by traditional banks".
Pros and cons of non-bank lenders
Potential pros
- More flexible lending criteria: Since non-bank lenders aren’t regulated by APRA, they sometimes have less strict lending criteria than banks.
- Rates: Canstar data suggests average variable rates are lower at non-ADI lenders, at the time of writing.
- Specialist lending: Some non-bank lenders specialise in lending to certain borrowers (those with low credit scores, for example) so they might be able to offer products better suited to your specific situation.
Potential cons
- Less infrastructure: Non-bank lenders generally operate at a smaller scale than the big banks. You might find their branch network or technology platforms are smaller than those available from the majors.
- Fewer features: Non-bank lenders also aren’t able to offer all the same features on their products as banks can. For example, since a non-bank lender can’t accept deposits, they can’t technically offer offset accounts. However, some non-banks find creative ways to add different features that work in much the same way.
Non-bank lenders in Australia
Prominent non-bank home loan lenders in Australia include:
- Homestar
- Athena
- loans.com.au
- Unloan
- Firstmac
- Pepper Money
- Liberty Financial
- Resimac
