Moody's Investors Service says the rapid growth seen by Australian non-bank lenders, in part reflecting their push into housing investment and interest-only mortgages, is positive for the quality of their loan books and residential mortgage-backed securities. This was done in the wake of speed limits placed on bank lending into these markets.Investment and interest-only loans accounted for almost 35 per cent and just over 25 per cent of all loans originated by non-bank lenders in Q3 2017, up from around 15 per cent prior to 2014."While investment and interest-only mortgages have historically been riskier than owner-occupier principal and interest mortgages, they are less risky than the non-conforming or alternative documentation loans that most non-bank lenders have traditionally focused on," said John Paul Truijens, a Moody's vice president and senior analyst.Moody's points out that the push into investment and interest-only lending has further attracted private equity investors with three acquisitions of non-bank lenders over the past nine months.These positive remarks were modified by a set of sustainability caveats:•    If non-bank lenders were to push into the riskier segments of the investment and interest-only mortgage markets to maintain growth, this would pose risks - eg, the need for an equally rapid expansion of underwriting teams, could dilute the level of staff experience and risk controls at non-bank lenders. •    Should the banks return to pursuing strong investment and interest-only lending growth, the increase in competition would make it difficult for non-bank lenders to maintain their rapid growth in these markets, which in turn could drive these lenders to the riskier segments of the mortgage market. •    Further growth also depends on the availability of funding - and that's not guaranteed for non-bank lenders, reliant on bank funding via warehouse facilities for the initial origination of loans and for RMBS investors to fund further lending. The availability of both these funding sources is dependent on confidence in market and economic conditions.Nevertheless, Moody's views non-bank lenders as generally well-placed to underwrite and "risk-price" investment and interest-only loans."Such mortgages require more scrutiny of borrowers' financial situations than owner-occupier principal and interest loans. Non-bank lenders, because of their experience in underwriting non-conforming loans, are generally well placed to provide such scrutiny," Moody's said.The risks are further mitigated by legislative amendments that were made in February 2018 to allow the Australian Prudential and Regulatory Authority to regulate non-bank lenders, enabling it to react to any threats to financial stability.