Investors in non-bank lenders say they are worried about the possibility of rising loan losses from higher interest rates, a slowing mortgage market and relatively higher funding costs compared with major banks.

But investment bank Citi says such concerns may be overblown, reinforcing a more sanguine view of the sector. It has pointed to the prudential regulator’s ongoing scrutiny of bank interest rate buffers and rising deposit rates as factors that might reduce the majors’ advantage in writing home loans and help the non-banks to compete more aggressively.