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Non-bank ORDE Financial has seen its alternative documentation residential construction loan find traction with brokers since launching in August, according to the lender’s director of distribution.
ORDE Financial launched the residential construction product almost four months ago targeting borrowers requiring alternative documentation income verification or facing credit challenges.
Director of distribution Lee Prior (pictured) said the product had seen “immediate support” from brokers.
“Since its launch in August, we have seen consistent month-on-month growth and construction has already become one of our biggest product lines,” Prior told Australian Broker.
The non-bank lender’s product launch was a response to a niche market segment it had identified, based on growing demand for support in the mid-tier alt doc market for resi construction deals.
“While major projects and standard PAYG residential builds are well-served, there is an increasing number of customers with unique needs,” Prior said.
Some of these customers include self-employed borrowers or those with complex income streams who “fall between these gaps” and require more tailored solutions, Prior said.
The residential construction market has faced challenges in recent years, including supply chain disruption during the pandemic period and a significant rise in costs in building construction.
CoreLogic’s latest Cordell Construction Cost Index saw the cost of building a house rise 1% in the September quarter, adding up to a 3.2% total cost rise in the 12 months to September.
CoreLogic economist Kaytlin Ezzy said the latest rise was “unwelcome news for builders”, who had seen costs rise 29.5% and were struggling with the feasibility of projects as well as profits.
CoreLogic added over the year to June only 176,000 dwellings were completed, 26.6% below the 240,000 annually needed to fulfil the Government’s promise of building 1.2 million over five years.
Prior said with population growth outstripping dwelling completions consistently, at an average of about 350,000 people per annum, there may be more customers that do not fit bank profiles.
“We also see borrowers sensibly looking to build a number of dwellings to match the demand for housing and secure their financial future. This is a path we expect to support well,” Prior said.
"With the official start date for the government's target for 1.2 million new well-located homes over five years kicking off in July, the recent re-acceleration of the CCCI could put additional pressure on an already difficult-to-achieve goal,” he said.
ORDE Financial seeks to take a tailored approach to individual loan scenarios, which has resulted in the sourcing and funding of a lot of non-typical deals in the residential construction space.
“We’ve supported several brokers with builder-owner customers – where the borrower is a fully licenced and qualified builder building their own home under their own business,” Prior said.
The group has also seen a significant inflow of alt-doc deals over the few months since the loan product was launched, as well as deals involving duplexes with a view to hold.
ORDE Financial has already made updates based on feedback from brokers, including increasing the maximum loan size limit to $2.5 million in October and lowering rates this month.
“We want to maximize the effectiveness of the solution for brokers and provide a smoother path to a ‘yes’ for their customers,” Prior said.
The group is supporting the new product offering with internal construction product expertise to allow the lender to workshop new deals, under head of credit Jason Gidman.
The group’s deputy head of credit Luke Jones, who is ORDE’s in-house construction expert, is playing a lead role in the product’s delivery to the broker market.
“Our team will work with brokers to find the right solution for customers, guiding them through the process, from scenario workshopping to post-settlement,” Prior said.
