MONEY FOCUS

With Heidi Armstrong

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Australians are taught at a very early age how the banking system works and most understand how banks lend out money for home loans. We don’t get the same education about non-bank lending and so the banks dominate the lending space. The very existence of non-bank lenders promotes innovation and home loan interest-rate competition. This is good for all borrowers. Many non-bank lenders finance home loans by securitisation – basically they convert the mortgages and cash flow emanating from the mortgages into rated securities known as residential mortgage-backed securities (RMBS) for investors looking for a safe and reliable return. In short, the non-bank lending story is a good one – it just needs to be heard.

Heidi Armstrong is director of operations at State Custodians

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