As we head into 2026, Australia’s lending landscape is at a crossroads. Traditional banks are retrenching from key segments – from small business financing to higher loan-to-income mortgages – creating a vacuum in credit supply, says Pepper Money CEO Mario Rehayem.
It’s a development that hasn’t made headlines, but one with profound implications: specialist non-bank lenders will be more vital than ever in the year ahead.
For the past two decades, I have seen firsthand how non-bank lenders keep stepping up to fill gaps left by the majors.
Every week, brokers present us with a significant number of examples where creditworthy Australians and business owners are being turned down by the bank’s strict “tick-box” criteria, often for reasons that have little to do with their true risk profile.
These are aspiring home owners with unconventional income streams or solid small businesses that briefly fell outside a rigid policy. When such borrowers hear “no” from their bank, the story shouldn’t end there – and that’s exactly where non-bank lenders come in.
For example, Pepper Money has helped over half a million Australians achieve home ownership or keep their business dreams alive after being turned away elsewhere – and each success means a family housed, an investment portfolio created, or jobs generated through business expansion.
That real-life impact, behind all the numbers, is what makes specialist lending truly special in my view.
Rising rates, tighter rules
Most analysts expect interest rates to rise again in 2026 as inflationary pressures linger. Higher rates usually make borrowing harder – repayments increase, and affordability tightens.
For banks, that often means even stricter lending criteria on top of APRA’s new debt-to-income caps.
Non-bank lenders can respond differently. We’re not bound by those caps, and we take a more holistic view of a customer’s situation. So, while rising rates will challenge borrowers, they’ll also highlight the value of flexible lending.
For many Australians, non-bank options will become a lifeline when traditional lenders pull back even further. The same story is playing out in business lending.
Rising rates and stricter capital rules have made banks cautious. Healthy businesses are losing access to credit because they “no longer fit policy”.
That’s left a gap, and SMEs are turning to non-bank lenders in record numbers. A decade ago, only 7 per cent of small businesses considered a non-bank lender. Today, more than half plan to.
From alternative to mainstream
Non-bank lending isn’t fringe anymore. It’s a trusted, regulated part of the market. We’re funded through capital markets, not deposits, which gives us flexibility to innovate. Brokers now see non-bank lenders as reliable partners – not just for complex cases, but for everyday borrowers.
At Pepper Money, we focus on financial inclusion. We look at the full picture, not just a payslip. That means considering alternative income verification, flexible documentation, and tailored loan structures. We take a “Can Do” approach, not a blanket “Computer says no” approach.
Ultimately, the rise of specialist lending is about choice and resilience. A resilient financial system isn’t one where every lender behaves the same and serves only the lowest common
denominator risk profile.
It’s one where different types of institutions can cater to different segments, all under fair regulation and market discipline. Non-bank lenders provide that complementary strength.
As banks recalibrate under new pressures – whether that’s complying with a DTI limit or reining in business lending due to economic uncertainty – non-banks will ensure that everyday Australians and entrepreneurs aren’t left without options. They will do it by continuing to be agile, inclusive, and innovative.
The numbers tell the story
Non-bank lenders are growing fast. In 2025, non-ADI mortgage volumes jumped 25.3 per cent, compared to 3.9 per cent for major banks. Broker reliance on non-bank lenders in Australia is rising sharply.
Surveys show more brokers are actively increasing their use, and market share data confirms that non-banks are capturing a larger slice of broker-originated loans. Australians are embracing choice.
Non-banks are turning the “last resort” perception on its head. Brokers tell us their clients are increasingly open to non-bank options early in the process; in fact, around 85 per cent of mortgage customers were willing to consider non-bank lenders in 2025.
Once they see the competitive interest rates and pragmatic lending terms on offer, many realise these lenders can often deliver a solution just as secure as a bank’s – and sometimes a lot faster.
Experience rules
Speaking of fast, speed and client fit are hallmark advantages of non-banks. With streamlined credit assessment and empowered credit teams, they can issue approvals in hours – for deals that might sit for days at a major bank. In a market where opportunities move fast, that agility matters.
Brokers also want certainty: a quick answer that matches expectations, without last-minute surprises. Great products and policies are important, but a consistently smooth experience is what truly differentiates a lender. A fast “yes” is valuable, but a fast and accurate “yes” (or “no”) is even better.
What’s ahead in 2026
As we embrace 2026, it’s clear that non-bank lenders will be essential partners in Australia’s financial ecosystem.
This isn’t a call to bypass the banks – far from it. Banks will always be central to serving the mass market and managing the flow of credit in the economy, and we need them to remain to be strong.
But for those areas where their reach stops short, specialist lenders are ready to bridge the gap.
With APRA’s new rules and banks focusing on prime lending, more borrowers will need alternatives.
Non-bank lenders are ready. We’re well-funded, diversified, and committed to responsible lending and customer centricity.
Our approach combines data with human judgement – because behind every application is a person or a business with a story.
We work closely with brokers – the advisers who understand a client’s full situation – and together we ensure borrowers are aware of all their options, not just the big four’s menu.
That includes educating customers that non-bank lenders are established, regulated institutions, not a last resort. In fact, the non-bank sector today is a vibrant collection of institutions, many of them household names with decades of experience.
Diversity in lending is healthy – it spurs innovation and keeps credit flowing, even when one part of the system tightens up.
So, when I’m asked why I believe non-bank lending will become even more crucial in 2026, my answer is simple: because it’s filling needs that are growing, not shrinking.
In a year when big banks may play it safer than ever, non-bank lenders will be out there saying “yes” where others say “no”, offering really helpful and responsible options for borrowers who just need someone to take a closer look.
That’s the unique perspective – and the promise our people and brand stand by. It’s not about taking risks – it’s about seeing the potential in people and businesses that a formula might overlook and helping write the next chapter of their success.
And from where I sit, that role will be more vital than ever in the coming year.
Mario Rehayem is the CEO of non-bank lender Pepper Money.
