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 floors — typically 100–200bps 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 usable borrowing capacity.

Banks require payslips for PAYG borrowers and two years of tax returns plus ATO Notices of Assessment for self-employed borrowers. This creates a structural problem: tax-effective business structures — the kind professional accountants recommend — minimise taxable income. A business generating $300,000 in distributable income may report $90,000 in the owner's personal tax return.

Non-bank lenders accept an accountant's declaration of income, BAS statements, and bank statement analysis in place of tax returns. This means borrowers can be assessed on their actual economic capacity rather than a tax-minimised figure. The documentation pathway changes; the underlying credit quality does not.

Bank credit systems treat any adverse event — default, judgment, Part IX, or serious delinquency — as an automatic disqualifier regardless of amount or recency. A $150 telecommunications default from three years ago carries identical weight to a $30,000 personal loan default from last year in most bank credit decision engines.

Non-bank specialist lenders assess adverse events against four factors: recency, cause, quantum, and resolution. An event that is old, caused by temporary hardship, small in size, and paid in full is priced differently from a recent, large, unresolved pattern of default. The outcome is not automatic approval — it is a structured credit assessment rather than an 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.