Shadow banks swoop as five lenders quit sub-prime home loans

Digital home-loan lender Tic:Toc is launching into the sub-prime mortgage market targeting small business owners as five other lenders quit the sector claiming “industry changes”.

Tic:Toc’s move follows stakes being taken in the online lender by Genworth Mortgage Insurance Australia and La Trobe Financial, which is part of the US investment giant Blackstone Group.

Other major lenders, including Commonwealth Bank of Australia and Bank of Queensland, pulled out of the sector to be replaced by regulation-lite shadow banks, including Pepper Money and Resimac.

Adelaide Bank, Perth-based Bluebay Home Loans and Resolve Finance’s mortgage division are also quitting the sub-prime sector blaming changing marketing and funding conditions.

The move comes amid growing controversy about a credit squeeze for small business operators, debate about the future of mortgage brokers as a distribution channel and growing popularity of online and regulation-lite shadow bank providers.

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Source: Shadow banks swoop as five lenders quit sub-prime home loans