Pepper Money broker flows at 96%

In New Zealand, the lender had 100 per cent of mortgage loans originated through broker channels.

According to Mario Rehayem, chief executive of Pepper Money, the strong broker flows came as more brokers seek options outside of the mainstream banks amid a tightened serviceability environment.

Speaking to The Adviser, he said he was “encouraged” that there was an “unprecedented growth” in brokers recommending Pepper Money to borrowers for the first time.

“[T]his is a strong indication that more mortgage brokers are utilising their panel of lenders and giving their customers the highest probability to yes,” he said.

“As banks continue to tighten their credit policies and have a higher reliance on credit scoring algorithms, the more brokers will gravitate to non-banks they can trust.”

The CEO suggested that the lender’s “ease of doing business and speed to yes” as well as its “consistency” was also creating strong broker buy-in.

New products and enhancements to roll out

Looking forward, Rehayem revealed that the non-bank lender will continue to invest in broker education and will be pushing out “a number of new products” in the mortgages space this year, as well as product enhancements (including to its new SMSF product) that respond to broker and customer feedback.

Pepper Money also has new technology enhancements in the pipeline that, according to Rehayem, will increase automation in the loan process experience “ultimately delivering unrivalled time to yes to customers of all walks of life”.

It will also work to further enable API connection into broker CRMs to help asset finance brokers deliver “a higher level of auto approvals and significantly improv[e] time to yes and time to cash” and hopes to accredit more mortgage brokers as they look to diversify their service offering.

Rehayem said: “We pride ourselves on our consistency which gives brokers ultimate confidence in the outcome.

“This consistency is enhanced through the use of our technology platform and our cascading credit model – designed to deliver customers the highest probability, and quickest time, to yes.”

Overall, Pepper Money’s total assets under management (AUM) came to $19.7 billion at the end of 2023, an increase of 3 per cent from $18.2 billion in December 2022. According to the bank, this is the highest AUM it has ever achieved.

Mortgage AUM made up $12.6 billion of the overall loan portfolio, down from $13.5 billion in 2023, whereas asset finance increased 21 per cent over 2023 to $5.7 billion.

Commercial brokers made up 27 per cent of overall asset finance loan originations (down from 35 per cent in 1H22).

Mortgage brokers and auto brokers each made up a further 18 per cent of asset finance originations at Pepper Money.

Both percentages were a decrease from the 1H22 period, where mortgage and auto brokers made up 21 and 19 per cent of loans, respectively.

Rehayem stated: “Pepper Money’s CY2023 financial results demonstrate our disciplined approach to knowing when to focus on growth and when to manage for value.

“The conditions reflect intense competition as well as volatility in swap rates, impacting funding margins.”

The results came after Pepper Money announced policy changes to its loan-to-value ratios, securitisation, and serviceability solutions to support customers and brokers through market challenges.

[Related: Pepper Money announces commercial mortgage policy changes]