The structural case for non-bank lending.

APRA's debt-to-income cap, effective February 2026, restricts banks from extending new loans where the borrower's total debt exceeds 6× their gross annual income. This is an absolute limit — banks cannot approve exceptions regardless of the borrower's credit quality, repayment history, or asset base.

Non-bank lenders are not APRA-regulated. They are not subject to this cap. A borrower with a portfolio producing a 9× DTI remains fully eligible for non-bank assessment on their individual merits.

APRA requires banks to assess every borrower's ability to service a loan at the actual interest rate plus 300 basis points. If the actual rate is 6.5%, the bank assesses repayment capacity at 9.5%. This buffer was introduced to guard against rate rises but has become a persistent constraint on borrowing capacity even in a stable rate environment.

Non-bank lenders assess at lower buffers — typically 1–2 percentage points above the actual rate, and some assess at the actual rate with stress scenarios applied case-by-case. On a $1.5M loan, the difference between a 9.5% and a 7.5% assessment rate can represent $200,000+ in additional borrowing capacity.

Banks require payslips for employed borrowers and two years of tax returns for self-employed borrowers. This creates a structural problem: tax-effective business structures — the kind accountants recommend — minimise taxable income. A business generating $300,000 in actual income may show only $90,000 in the owner's tax return.

Non-bank lenders accept an accountant's letter confirming your income, business activity statements (BAS), and bank statement analysis in place of tax returns. This means you can be assessed on your actual earning capacity rather than a tax-minimised figure. The paperwork changes; the underlying credit quality does not.

Bank credit systems treat any adverse event — a default, a court judgment, a debt agreement, or serious overdue payments — as an automatic disqualifier regardless of amount or how long ago it happened. A $150 phone bill default from three years ago carries identical weight to a $30,000 personal loan default from last year in most bank credit systems.

Non-bank specialist lenders assess adverse events against four factors: how recent it was, what caused it, how large it was, and whether it has been resolved. An event that is old, caused by temporary hardship, small in size, and fully paid is treated very differently from a recent, large, unresolved pattern. The result is not automatic approval — it is a proper assessment rather than a blanket exclusion.

Major bank residential mortgage approvals typically require 5–15 business days for formal approval. During high-volume periods, this extends further. For auction purchases — where unconditional exchange often occurs at fall of hammer with a 42-day settlement — bank pre-approval timelines create genuine risk.

Non-bank lenders operate with direct credit teams, no committee structures, and modern origination systems. Conditional approvals in 24–48 hours are standard across most prime non-bank products. Formal approvals within 5 business days. For borrowers who need certainty quickly, this structural advantage is independent of rate considerations.