From Banks to Private Lenders: The Changing Face of Australia’s Lending Landscape

For decades, the ‘Big Four’ banks were the gatekeepers of Australia’s credit market. If you wanted a loan, you had little choice but to enter a bank branch, where options would be limited to that specific institution’s products. However, in recent years, the banks’ control over lending has loosened in Australia, as we’ve witnessed an ongoing structural shift towards private lenders. We’ll explore this transition, analysing what is happening, the underlying causes, and where the future might lead us.

What Is Happening?

Global Growth

Put simply, the value of the global private credit market has grown dramatically in recent decades, increasing by 1250% since 2010.

According to a recent report from EY-Parthenon, the global private credit market has climbed from $0.4 trillion in assets under management in 2010 to $5.4 trillion in March 2026, increasing at a compound annual growth rate (CAGR) of 18.1%. Estimates forecast that this figure will continue to rise to $7.8 trillion by 2029.

Australian Growth

In Australia specifically, the private credit market has outpaced even these rapid global growth rates, climbing at a CAGR of 21% between 2015 and 2025 to reach $234.5 billion in assets under management. Of this $234.5 billion, ASIC estimates that approximately half is real estate-focused finance, with Alvarez & Marsal noting that this represents 9% year-on-year growth.

In contrast, the CAGR for commercial bank lending and corporate bonds in this same period was 5.5% and 4.8%, respectively. Currently, this growth shows few signs of stopping, with forecasts suggesting the Australian private credit market is expected to increase at a 13.1% CAGR between 2026 and 2028.

Real Estate Penetration

To look at this another way, CBRE finds that residential development loans funded by private credit make up 26% of the total real estate debt in Australia. That figure is up from 14.7% in 2019, with forecasts suggesting this will reach 35% by 2030. On the other hand, banks have halved their commercial real estate (CRE) lending from 10% to 5.5% of total assets since 2009.

As such, Australia is seeing two distinct trajectories: as private lenders increase their participation in the Australian real estate market, banks are scaling back. Supporting these claims, the Australian Bureau of Statistics found that between December 2023 and December 2024, the value of new home loan commitments by investors through non-ADI lenders rose by 44.6%.

Niche No More

The rapid growth of private credit has also drawn increased scrutiny from regulators such as ASIC and APRA, underscoring the sector’s increased visibility and transition from a niche segment to a mature, systemically relevant component of the Australian financial landscape.

Accordingly, EY-Parthenon explains that “private credit has rapidly expanded in Australia, moving from a niche option to a significant, growing source of corporate and commercial financing.” However you slice the figures, the Australian private credit market is no longer the niche segment it was a decade ago; rather, it is a rapidly expanding pillar in Australia’s funding landscape.

A Broader Trend

These trends aren’t exclusive to private credit, either, as there has been a similar shift away from banks when it comes to mortgage brokers. When the Mortgage & Finance Association of Australia (MFAA) first began tracking this data in the December 2012 quarter, mortgage brokers facilitated 44% of all new residential home loans in Australia. By the June and September 2025 quarters, this figure had skyrocketed to mortgage brokers facilitating 77.6% and 77.3% of all new residential home loans in Australia, respectively, marking the two highest quarters on record.

According to RFI Global, the percentage of borrowers who prefer a broker as their primary application channel has risen to 52% as of March 2025, up from 39% in 2022, while brokers also attract a significantly higher proportion of repeat customers (88%) than banks (52%). As such, this is not just a trend; it is a structural shift in how banks lend and the options that customers have.

Investor Satisfaction Statistics

This surge in alternative borrowing is matched by a corresponding surge in capital from those looking to fund it, as recent surveys show 81% of investors expect to increase or maintain their allocation to private credit over the next three years, while Praemium found that 32% of Australian high-net-worth investors ($1 million+ in investable assets) plan to increase their investment in private credit over the next 12 months.

It makes sense that these investors would want to expand their portfolios, as, according to a survey by Preqin, 91% of investors say private credit either meets or exceeds their expectations.

Even so, it is important to remember that while private credit can offer attractive yields, these returns typically reflect factors such as lower liquidity, higher complexity, and increased borrower risk relative to traditional lending.

Why is This Happening?

It’s one thing to note that this shift is happening, but, for savvy investors, it’s crucial to understand why. While there is a complex variety of factors at play, regulatory changes have arguably had the greatest impact. In the wake of the 2008 GFC and the 2019 Royal Commission into Banking, tighter regulations led many banks to scale back their lending to small and mid-sized enterprises (SMEs) and CRE projects, opening the door for private lenders to fill the gap.

Regulatory Changes

For instance, the rollout of Basel III and IV regulations—including the mandated 72.5% output floor, which limits how low banks can set risk-weighted assets using internal models—has meant that lending to 'unrated' businesses or early-stage property developments now requires banks to set aside significantly more capital, making these sectors less profitable than in the past.

In fact, while the Big 4 banks hold a market share of approximately 58% of SME lending in Australia, research shows approval rates of roughly 25 to 35% for loans under $1 million, with roughly two out of three applications rejected. To show how rapidly this landscape has changed, an ABA report from 2017/18 noted that the majority (86–87%) of small businesses seeking finance were successful at that time. While not directly comparable due to differences in methodology, this shift highlights a perceived tightening in credit availability for SMEs. In fact, 12% of SMEs cited declining bank credit appetite as the primary trigger for switching to non-bank lending—up from 3% in 2018.

Additionally, ScotPac recently found that the share of SMEs turning to non-bank lenders for new investments has tripled since 2019 to 57%, while 92% of SMEs say they are open to considering using a non-bank lender in the future.

ScotPac also found that other key factors driving SMEs towards non-bank lenders include:

• Avoiding the use of non-property assets as security or personal guarantees (19%)
• Streamlined onboarding and reduced administrative burden (17%)
• Faster access to funds (16%)

This final point is particularly pertinent, as Bizcap finds that 61% of SMEs have abandoned bank applications entirely due to documentation hurdles. In contrast, many private lenders can approve loans in a matter of days, with Bizcap finding that 80% of non-bank borrowers accessed funds within a week.

Other regulations, such as APRA’s 3% mortgage serviceability buffer and the recently introduced debt-to-income (DTI) rules, have contributed to a decline in credit appetite for banks in some sectors and led them to adopt more rigid, ‘one-size-fits-all’ lending criteria, even as the rise of self-employment has led to the pool of potential borrowers becoming more diverse than ever.

Therefore, as banks continue to focus on standardised, lower-risk lending while simultaneously reducing their appetite for construction and development, many private lenders remain active, committed funders in these sectors, stepping in to fill the gap. Given this, the migration toward private credit appears to represent a structural shift in the Australian financial system, with a transformed regulatory landscape meaning that it would be difficult for banks to reclaim this territory even if their risk appetites returned. Accordingly, the 'revolution' in private credit is more than just a fringe alternative asset class—it has become a crucial, increasingly mainstream part of the lending landscape, and a key consideration for savvy investors.

Want to learn more? Explore the ASCF High Yield Fund.

Disclaimer: This article is prepared by Dom Murray. It is for educational purposes only. While all reasonable care has been taken by the author in the preparation of this information, the author and InvestmentMarkets (Aust) Pty. Ltd. as publisher take no responsibility for any actions taken based on information contained herein or for any errors or omissions within it. Interested parties should seek independent professional advice prior to acting on any information presented. Please note past performance is not a reliable indicator of future performance.