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In New Zealand, there are two main types of lenders for home loans: banks and non-bank lenders. While both offer similar products, there are some key differences between the two that borrowers should be aware of when considering their options.

What defines a bank in NZ?

Banks are financial institutions that are authorized to accept deposits from the public and use those funds to provide loans and other financial services. In New Zealand, banks are regulated by the Reserve Bank of New Zealand and must adhere to strict lending standards and regulations. Banks typically have a larger range of products and services, including a variety of home loan options such as fixed and variable interest rates, offset accounts, and redraw facilities. They also have the ability to provide other financial services, such as savings and transaction accounts, credit cards, and insurance.

What is a non-bank lender?

Non-bank lenders, on the other hand, are financial institutions that do not have the ability to accept deposits from the public. Instead, they rely on other sources of funding, such as wholesale markets or securitization, to provide loans to borrowers. Non-bank lenders are not subject to the same regulatory requirements as banks, but they are still subject to lending standards set by the Responsible Lending Code. Non-bank lenders typically have a smaller range of products and services compared to banks, but they may offer more specialized home loan products or be more flexible in their lending criteria.

OK... so what are the pros and cons?

There are pros and cons to both bank and non-bank lenders for home loans. Banks may offer more variety in loan options and other financial services, but they may also have stricter lending criteria and require more documentation. Non-bank lenders may offer more flexible lending criteria and a quicker application process, but they may also have higher interest rates and fees.

When choosing between a bank or non-bank lender for a home loan, it's important to consider your individual needs and circumstances. You should research different lenders and compare their interest rates, fees, and loan features to find the best option for you. It's also a good idea to seek advice from a mortgage broker or financial advisor to help you navigate the lending landscape and find the best loan option for your needs.

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