Tighter lending restrictions see New Zealanders seeking out second-tier lenders

Tighter lending restrictions have given rise to more Kiwis seeking out second-tier lenders for home loans.

As interest rates rise and regulations tighten, flexibility for customers is becoming a precious commodity.

Luke Jackson leads the New Zealand branch of Resimac, a non-bank lender that's seen a spike in interest.

"Particularly in the last nine months or so, I think people's awareness of non-bank lenders or alternative bank lenders has definitely increased," he told Newshub.

Experts Newshub spoke to put it down to offering customers flexibility in a financial market facing increased regulation.

"With people being declined by banks more and more often, people are turning to alternative options, and in most cases that's the second-tier lenders," said The Mortgage Lab CEO Rupert Gough.

The rise in demand for non-bank lenders has been attributed to the Government's law change in December requiring more scrutiny of a borrower's financial health. The Financial Services Federation has said it led borrowers to consider alternatives to the main banks.

While second-tier lenders have traditionally charged higher interest rates, in some cases the gap in those charges is closing.

"The rates between the banks and non-banks have got a lot closer," said mortgage adviser Jamie Sanderson.

"As they're finding it more difficult going to the more traditional lenders, they're looking at alternatives, and that's where they're learning that hey, this is actually a pretty competitive offer," added Jackson.

On top of rising interest rates, home-buyers are battling the Reserve Bank's tighter loan-to-value restrictions that limit how much banks can lend and soaring inflation.

"Non-banks do tend to have a bit more flexibility when it comes to looking at a person's situation, so typically people go to a non-bank if they've had bad credit history before or if they're self-employed and not able to verify their income," Sanderson said.

Aucklanders, when asked if they'd consider a second-tier lender, were evenly split.

"I'd probably consider it if the deal was right," one said.

"Probably more trustworthy to stick to a traditional bank," another added.

Interest in these non-bank lenders may continue with another increase to the official cash rate expected on Wednesday.