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By 2030 one in four people will be retired. And 50 per cent of all the wealth in property is for later age borrowers, later age customers. So, [that’s] 25 per cent of the total population and 50 per cent of all property wealth. This cohort are increasingly looking for these types of products to facilitate their finance needs when downsizing - because they don’t have any income as they’re retired.
We’re also seeing the property market changing. There is huge demand for property. But you these later age borrowers in this affluent marketplace can’t really sell their house first without having another property – they’d be homeless!
So, we saw that as an opportunity to come in and support those buyers.
James Green, CEO of Clinch
We have older borrowers that have all the wealth in Australia and they’re unable to get traditional bank finance. They can’t meet the serviceability requirements, but they’re good for the money. In fact, the credit on these deals is better, I think, superior to the 30-year mortgage market, but unfortunately it doesn’t fit the traditional infrastructure.
They’re short term. They’re really quick. They’ve got to be done really easily and they’re done with no income reliance. We’re talking about no job, no income and we’re giving them money. People would say that sounds scary, like something out of the global financial crisis (GFC). But these guys, unlike in the GFC, are asset backed. They have huge assets behind them. But how the regulators look at this space and how the banks look at this space in current marketplace just doesn’t marry.
That’s why non bank lenders such as ourselves can provide the solution.
“We have older borrowers that have all the wealth in Australia and they’re unable to get traditional bank finance.”
— James Green, CEO of Clinch
We’ve got a much more aggressive approach to onboarding these customers. We’re taking a lot of the best practices in terms of digital lending and high customer service. We’ve combined technology with a human factor that we’re really proud of. And then we’ve combined it with a really efficient funding structure. It creates a really incredible customer experience.
We’ve had to look at funding differently and do it uniquely because it didn’t fit traditional methodologies. That means we’ve got much better, more aggressive pricing. So, we’re fast and cheap and easy. And that’s what sings to this cohort.
“We’ve combined technology with a human factor that we’re really proud of.”
— James Green, CEO of Clinch
We approach it predominantly around the asset that they’re buying and the asset they’re selling. We call them incoming and outgoing properties. It’s a really simple concept to understand.
We are really focused on the outgoing property because that’s the property that’s going to be used to pay off the loan. So there’s no end-debt. We really focus on what that underlying security is. And we can lend up to 80 per cent against that security. Then we can also add the incoming security, so we can get these really big loan amounts. In fact, our average loan amount is $2.4 million, which is three to four times higher than the average 30-year loan. We’re literally doing those deals, from start to finish, in a week.
They’re coming in through a very simple Q and A online process. It takes about five minutes and it focuses on the asset, the purpose of the loan and their living situation after the sale of the outgoing asset. It takes into consideration other factors like making sure that we’re lending it responsibly to the elder cohort.
We’re also looking at things like elder abuse and making sure that their post-sale living conditions are reasonable. Then we simply run that through our underwriting process and can settle with a traditional type of legal lending paddle in under a week.
“We’re literally doing those deals, from start to finish, in a week.”
— James Green, CEO of Clinch
In the UK, there is a real focus on the equity release market for older borrowers. So that’s something we’re going to be bringing out; whether it’s a combination of a bridging product or a new product that we’re developing at the moment that will soon launch.
We really think that these borrowers are looking for fast finance and accessing their equity but they don’t want the complications of traditional lending methodologies or a complex underwriting serviceability assessment. They’re looking for a simple, easy route to their money.
Another thing we’re seeing that’s really shifting in other parts of the world is short-term funding. Short-term lending is becoming really in vogue.
James Green, CEO of Clinch
As part of the AltX Financial Group, Clinch is an institutionally funded Australian non-bank lender, servicing brokers and borrowers with bridging finance and equity release solutions.
