The Changing Landscape of Private Mortgages & Funds in Australia

I'd next like to welcome Nick Alcock from Australian Secure Capital Funds or ASCF.

ASCF provides a range of pooled mortgage funds with the objective of providing investors with the targeted distributions in the range of 6.10 to 7.50 percent depending on the fund that you invest in.

Nick has a deep interest and experience in investments, property and finance and spends his time engaging with all of ASCF's investors.

He will talk to us today about the changing landscape of private mortgages and funds in Australia including the underlying reasons driving the evolution and importantly how it impacts investors.

It's great to have you here, Nick.

We're looking forward to hearing from you.

Over to you.

Thanks, Darren.

Thanks for the invite.

It's been good to join the investment markets recently, so we're looking forward to a good future with you guys.

What I've talked about today is why investors are turning to mortgage funds in uncertain times as such we have now.

Over the past decade, the Australian private lending market has undergone a remarkable transformation.

What was once considered a niche corner of the financial system has grown into a significant, increasingly important part of the lending landscape.

Ten years ago, private credit in Australia was relatively small, controlled by accountants and solicitors.

It was estimated at the time to be around in 2014.

as the market assets under management of 57 billion.

As of 2026, that figure has climbed to beyond 148 billion, meaning it has a growth of 160% in a decade.

Similarly, the private debt market has also experienced significant growth, increasing 9% year on year in 2025 to exceed 224 billion.

In other words, Australian private credit sector has more than doubled in the past decade.

This growth has not happened by accident.

It reflects major structural shifts in the banking and lending sector, investor demand for reliable income and a broader changes in the global investment environment.

Today, I want to explore three things.

How much the private lending market has grown, the key forces driving that growth,

and why mortgage investment funds are increasingly attractive in today's uncertain world.

With the growth of the private lending in Australia, as just mentioned over the past decade, the Australian private credit market has grown from roughly $57 billion in 2014 to more than $148 billion in 2026.

At stages now, that's about 160% growth.

During that time, the sector has averaged 20% compound annual growth rate compared to 5% for banks and bonds.

In the past, traditional private lending would have primarily covered commercial private lending, development finance, small to medium business lending, structured lending solutions.

But now, this has started to expand into the real estate back to lending market.

So it's seen mortgage interest funds increase as a more professional factor in this predominantly retail sector.

Today, private credit is estimated to account for around 4.2 of the commercial lending, 80% of commercial real estate and 20% of residential development sector in Australia.

That's a substantial share of the market and demonstrates how private lenders have become an important alternative source of finance.

On the other hand, banks have halved their commercial real estate lending from 10% to 5.5 of total assets since 2009, with the total market share falling from 87% to 75% in this period.

But the real question is what has happened?

The structural shift in banking of lending is what's happened.

The biggest driving growth in private lending has been the structural shift in how banks operate.

After the global financial crisis, regulators around the world significantly tightened banking regulations, especially in the mortgage industry.

In Australia, the banking regulator APRA introduced stronger capital requirements and stricter lending standards.

These rules were designed to make banks safer and not overly stress the borrower's ability to manage their repayments.

However, these regulations also had an unintended consequence.

that has created a gap in the lending market.

Increased regulations and higher lending rates have caused a tighter position on serviceability.

Since October 2021, when it was last increased, APRA has maintained the mortgage serviceability buffer of around 3% in Australia.

Factor this 3% lenders buffer in and we now see situations as ACF where hopeful refinances sometimes don't even service with their current lenders.

So we reached a situation where borrowers still needed funding and projects still need finance, but the traditional banking system was no longer willing to provide it in some cases.

This gap has increasingly been filled by private lenders with mortgage investment funds.

Largely, this is because private lenders can be more flexible in their approach.

They can assess each loan on its merits, looking not just at the property, but also the type of asset, the location of the asset, the viability of the project, the borrower's experience, and the exit strategy on repayment, which is obviously very important.

This ability to assess loans more holistically has allowed private lenders to step in where banks cannot, servicing borrowers where banks refuse to.

So when it comes to investors' demand for income, this is played into the hands of investors that are looking for a more reliable and predictable income.

Over the past decade, investors have faced a difficult environment.

For many years, interest savings rates have been relatively low.

Term deposits offered average income.

Government bonds produced modest returns.

At the same time, equity markets, although were performing well, have now become increasingly volatile with various world events.

Investors looking for consistent income streams are increasingly searching for alternatives.

Mortgage funds have emerged as one of those alternatives.

Because these investments are secured by real estate assets, predominantly in our case, residential property, they can offer relatively stable income returns compared to many traditional investments.

With short supply of residential stock and the demand of owner-occupied or investment properties, values are strong in this asset class.

For investors who are focused on income rather than speculation, this has been an attractive, more comfortable position.

The appeal of asset bank lending.

Pulled mortgage funds that are secured against property assets offer more confidence in the current Australian property market, so the loans are backed by tangible collateral that is still showing market strength despite rate increases as mentioned just now.

While every investment carries risk, asset-backed lending offers a degree of stability that many investors find reassuring.

Our pulled mortgage funds factor in

Pulled funds in order to mitigate the risk as opposed to peer-to-peer lending.

Custodian to manage the funds on behalf of the investor.

Audited twice a year in order to maintain compliance.

Spread protection and reserve fund as potential options to cover any capital loss.

This approach means we start from a well managed basis on which to invest with more confidence.

For investors who are concerned about volatility in the equity markets, this type of lending can provide a more predictable pathway, one that provides their funds growing and staying above inflation rates.

Global uncertainty and the current investment environment.

Of course, no one can predict the future global markets, but with current recent events, uncertainty is increasing.

Investors have begun to look for investment opportunities that offer more comfort from being less exposed to daily market fluctuations.

As we know, equities can move dramatically based on sentiment and global events, but private lending is less affected by these global markets.

Loans still generate interest payments regardless of daily market movements.

For many investors, that consistency becomes particularly valuable during uncertain times.

So this is now a structured trend, not a temporary one.

Importantly, the growth of private lending doesn't appear to be short-term trend.

Many industry analysts believe the sector will continue expanding over the next decade.

We are receiving increased inquiries for short-term loans, so demand for investment funds to facilitate this extra demand continues.

Private credit has now become a major asset class, one that has clear place in the market.

So in summary, over the past decade, the Australian private lending market has grown from a relatively small sector into a significant part of the financial system.

The market has expanded from roughly 50 billion to more than 200 billion, reflecting powerful structural changes in the lending landscape.

Banks have become more constrained by rates and compliance requirements, borrowers still require funding, and investors are searching for reliable income in a certain world.

Private lending, particularly through mortgage investment funds, has stepped into the bridge to bridge that gap.

For investors, the key question is not simply where the markets are today, it's about where the opportunities lie in changing financial landscape in the short to medium term.

And increasingly, private credit is becoming one of those investment opportunities.

Darwin, I hope that helps and explains what we feel is important in the private lending market at the moment.

Back over to you.

Thanks Nick.

The growth in the market has certainly been steep and quick and compounded as you pointed out quite extensively over the last couple of years.

Where do you see all of this going?

What is the future of private lending?

What's going to happen in the next few years?

Well, we think, as mentioned before, it's just going to carry on growing.

It's just a strong sector.

Especially, we don't know what is going to happen with the short-term equity markets, but we're already getting quite an extra demand for investments, people moving from equity markets to this type of pooled fund.

They generally want the confidence that we can hopefully offer them.

Nick, what is ASCF doing to stand out in this market?

How are you helping investors?

It's a competitive market.

There are lots of people competing for the loans and competing for investors.

What are you doing?

Well, I think, you know, from day one, we've set ourselves as a lender and investor that offers a level of professionalism that sets us apart from others.

When they started the business, it was would have been very easy to have made it easier for themselves, but they didn't.

As it was a bit of registration, Africa, things like that was all standard start.

We have demonstrated capital preservation of clients investments over that time as well the nine years plus now.

with all being repaid on time and in full when requested.

We've offered strong targeted rates, all achieved since inception as well, and various retail wholesale funds.

So we give a range of types of funds to hopefully suit most investors' appetites.

Investors have direct access to us as well.

We're a smaller company where people can get hold of us directly.

which isn't necessarily an investment importance, but it does give them reassurance that they can get through to us and raise any concerns or questions they may have.

I know that goes down well with a lot of investors.

Track record and trust is always important for investors, Nick.

Yeah, it is.

Thank you very much for your time today.

Alright, thank you.