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60% of non-conforming borrowers don’t get a loan

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Reporter 5 minute read

Around six in 10 potential non-conforming borrowers don’t end up getting a loan because they are either rejected or do not apply for a loan at all, new data has shown.

Commissioned by Pepper Money, the research by 5th Dimension involved 1,016 people and targeted those who enquired about obtaining a home loan over the past 24 months.

The research also involved focus group discussions with non-conforming and self-employed borrowers.

According to the report, 39 per cent of potential non-conforming customers applied for a loan but were not approved, while 24 per cent never ended up applying at all.


For those who didn’t get approved, 28 per cent said they would delay their application until their financial or employment circumstances change.

Notably, the research found that 43 per cent of those who completed their home loan applied with a broker compared to 26 per cent who applied directly.

Moreover, 70 per cent of Pepper Money’s borrowers require help due to their type of employment, type of loan, issues with documentation or credit history.

The research also asked the potential non-conforming customers questions about what they knew about the non-conforming market.

Nearly 30 per cent said they were aware they wouldn’t fit the big four banks’ credit policies, while 25 per cent said they understood that there were higher rates tied to non-conforming loans.


Pepper has estimated that the specialist lending market could be worth approximately 10 to 12 per cent of the total home loan outstandings in Australia, which is now more than $1.4 trillion.

It is now calling on brokers to ensure that they are aware of the underserved market, and has launched a new online course as part of their Better Business eLearning Program.

“The unfortunate reality is that, in most cases, borrowers are not being made aware of their alternative options,” the lender outlined.

“Having access to a complete range of lending solutions from prime right through to specialist will not only expand brokers’ business, it will [also] give them the ability to help more families through real life hurdles,” Pepper said.

The lender has therefore rolled out a new e-learning module entitled “How to Offer an Alternative Solution” to help brokers identify how to successfully offer an alternative loan solution as well as tips to support brokers in navigating the emotional side of the customer’s lending experience.

[Related:  A third of brokers need help with customer acquisition: Pepper]

60% of non-conforming borrowers don’t get a loan
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