How Much More Does a Non-Bank Lender Actually Cost You in NZ?
If a bank has knocked back your mortgage application, "go to a non-bank lender" is the advice you'll hear from almost every broker. It's good advice, but it comes with a price tag that's worth understanding before you sign anything.
Here's the real cost difference, broken down by the type of non-bank lender you're dealing with.
The mainstream non-bank lenders aren't as scary as you think
Names like Liberty Financial and Pepper Money sit just one rung below the banks. They're not charging eye-watering rates- they're charging a premium, and it's smaller than most people expect.
As of mid-2026, the major banks' lowest advertised rates look roughly like this:
6-month fixed: around 4.49%
1-year fixed: around 4.65%
2-year fixed: around 5.19%
3-year fixed: around 5.29%
5-year fixed: around 5.49%
A mainstream non-bank lender like Liberty Financial, by comparison, has been pricing its 1-year rate starting from 5.90% — about 1.1 percentage points above the cheapest bank rate. On a 3-year term, the gap narrows to roughly 0.36 percentage points (5.65% vs 5.29%).
The pattern holds across the market: the premium is bigger on short fixed terms and smaller on longer ones. If you're going non-bank, a 2 or 3-year fix is often where you'll feel the rate difference least.
So in practical terms, for a standard non-bank residential loan, you're typically looking at an extra 0.5% to 1.5% on your interest rate compared to a bank.
Why people pay it anyway
Banks have lower rates, but they're also far more conservative. They're bound by loan-to-value restrictions and tend to want clean, well-documented income, which doesn't suit everyone. If you're self-employed with irregular income, recently changed jobs, have a low deposit, have a minor credit blemish, or you're trying to finance an unusual property, a bank might simply say no.
Non-bank lenders exist precisely to fill that gap. The extra interest you pay is effectively the cost of more flexible lending criteria — they're taking on a borrower the banks won't.
Where the real cost jump happens: specialist and private lending
The 0.5%–1.5% premium above only applies to the mainstream non-bank lenders. There's a second tier below that — short-term, low-doc, or private lenders — and this is where the cost difference becomes much more significant.
These lenders typically:
Lend for shorter terms, often 12 months to two years, on the assumption you'll refinance out once your situation improves
Place greater emphasis on available equity and the type of security rather than income to service the debt
Charge interest rates starting from around 1.5% above standard bank floating rates, although this can vary depending on the borrower's circumstances and the lender.
Add upfront establishment fees, often 1–2% of the loan amount or more, on top of the interest rate
This kind of lending makes sense as a bridge — to buy time, settle a purchase, or get through a rough patch — but it's an expensive place to park a mortgage long-term.
Don't forget: rate isn't the only number that matters
One thing that catches people out is assuming the advertised bank rate is the rate they'll actually get. Banks price differently depending on deposit size, income, and how strong the application looks — and going through a mortgage broker can sometimes get you a better deal than walking into a bank branch yourself, because brokers often access wholesale pricing tiers and create competition between lenders for your business.
So before assuming you need a non-bank lender at all, it's worth getting a broker to test the banks properly first. The "non-bank premium" is only worth paying once you're sure a bank genuinely won't lend to you on workable terms.