Non-bank loans hit $6bn as major banks tighten up

Liberty Financial's record $6.11 billion in FY26 originations signals growing opportunity for borrowers turned away by the major banks.

Non-banks step in as major banks tighten lending criteria

Liberty Financial Group recorded $6.11 billion in new loan originations for the financial year ending 30 June 2026 — a company record — at a time when The Adviser reports most major banks have announced at least a double-digit percentage drop in their demand.

The first half of FY26 was the stronger period, with Liberty writing over $3.08 billion in new loans across its divisions. The second half moderated to roughly $3 billion as what the group described as "subdued consumer demand impacted by increased rate cycle, cost of living and budget changes" began to weigh. Still, the full-year total set a new record for the non-bank, underlining a structural shift underway in the lending market.

Liberty chief executive James Boyle told The Adviser the company had been shielded from the falls seen at the major banks because of its fundamentally different structure. Liberty is not a deposit taker, and it sets its own risk appetite independently of the regulatory parameters that the Australian Prudential Regulation Authority (APRA) places on authorised deposit-taking institutions.

"We're able to help customers outside the parameters that APRA set. And it just seems that in recent times — the last year or two — that given the more challenging economic environment and the really strong conservative position of APRA, there are more customers needing our kind of help, and the help of non-banks," Boyle said.

The implication for borrowers is direct. Major banks have tightened income shading, borrowing power assessments, and credit criteria in response to both the interest rate environment and APRA guidance. Non-banks like Liberty can assess applications on their individual merits — particularly valuable for self-employed borrowers, contract workers, small business owners, and anyone whose financial profile sits outside the standard bank template.

"I think most banks have now announced at least a double-digit percentage drop in their demand," Boyle said. "But we certainly have been happy to be able to continue to help customers at the same rate since budget, as before."

What the numbers mean for everyday borrowers

Residential home lending drove the bulk of Liberty's result. The group wrote $3.53 billion in new home loans over FY26 — its second-highest residential volume on record (behind FY22, when it originated $3.9 billion). Liberty's overall loan book closed FY26 at $15.24 billion, with higher-yielding secured and financial services assets now comprising 50 per cent of the portfolio, up from 48 per cent at the midpoint of the year.

The picture was not uniformly strong. In the residential self-managed super fund (SMSF) segment, Liberty saw applications fall from $251 million in the first half to $230 million in the second half, as borrowers responded to the federal government's announced ban on new limited recourse borrowing arrangements (LRBAs) for residential property inside self-managed super funds. Boyle said he expects the SMSF residential segment to shrink further in coming periods as the ban takes full effect.

For SMSF trustees who have not yet finalised a residential property purchase inside their fund, this is a live timing issue. Once the ban is in force, new residential LRBAs will not be available, regardless of which lender you approach.

On credit quality, Liberty's 30-day delinquency rate reached 3.97 per cent at the end of the second half of FY26, and its 90-plus day delinquency rate was 2.20 per cent. Both figures improved compared with the same period a year earlier, suggesting that while cost-of-living pressures are real, Liberty's borrower base is broadly managing repayments. Boyle was candid that if elevated rates persist alongside falling asset prices and rising unemployment, all lenders would likely see softening flows in FY27.

For borrowers considering a non-bank product, these numbers provide useful context. A non-bank's delinquency profile reflects the composition of its borrowers — many of whom couldn't access mainstream lending — not necessarily the quality of any individual loan. But it is worth understanding that non-bank products can carry different pricing and conditions than mainstream lending. Always compare the comparison rate to understand the true cost including fees.

If you have been declined by a major bank and want to understand whether a non-bank path is viable, understanding your actual borrowing power is the right starting point. The numbers a major bank's system produces are not the ceiling on what you can borrow — they reflect what that particular lender, under that particular policy, will currently approve. A broker with a broader panel can assess what other options look like.

Technology investments and what they mean for processing speed

Beyond the financial results, Boyle outlined Liberty's investment in automation and AI tools, specifically targeting the speed at which the lender can assess complex applications. Non-bank applications often carry more documentation than a standard salaried loan — additional financial statements, tax returns, and supporting information that takes time to process.

"Speed of answer, in particular, is an area that we're deploying these tools to help us with the speed at which we can pick up complex applications," Boyle told The Adviser. He described Liberty as still in early stages of agent engagement and AI software development, but expected that brokers would start to see "consistent improvement" in responsiveness over the coming twelve months.

For borrowers, faster turnaround means a shorter period of uncertainty between submitting an application and receiving a clear answer — which matters particularly for purchases under time pressure, such as auction purchases or those with a short contract settlement window.

Liberty reported an 8 per cent increase in statutory net profit after tax to $144 million for FY26, with underlying NPATA rising 7 per cent to $156 million, supported by net interest margin expansion to 2.50 per cent and cost discipline across the group. A fully franked dividend of 15 cents per stapled security was declared, payable on 21 September 2026.

If you have been told your circumstances do not fit mainstream lending, exploring non-bank and specialist home loan options through a broker who accesses a wide lender panel is the practical next step. The criteria are different, the products are different, and the right fit depends on your specific situation — which is precisely what a broker is trained to assess.