How non-banks earned their seat at the table

TWENTY-FIVE years ago, when a little publication called MPA released its first issue, non-bank lenders occupied a very different position in the lending landscape.

Often viewed as a last resort for borrowers with complex circumstances, they were rarely the first option brokers considered. It was like the mortgage industry's equivalent of calling a locksmith at midnight: you didn't do it because you wanted to; you did it because you had no other choice. Bad credit, tax debt, a self-employed client the majors wouldn't touch – that's who ended up at a non-bank's door.

Over the past quarter century, however, both the broking profession and the non-bank sector have undergone a remarkable transformation, and few have watched it quite as closely as Mario Rehayem (pictured, top).

A 25-year industry veteran and Pepper Money's chief executive for the past nine, he's had a front-row seat to the non-bank sector's steady rise – and to the broking relationships that made it possible.

Looking back on the non-bank industry's relationship with brokers, Rehayem calls brokers "the flagbearers of the business" – the ones who positioned the fledgling sector as a viable option, not a last resort. He traces that reliance back to a structural reality non-banks couldn't get around at the outset.

"Most non-banks, back then, weren't a household name or a household brand," Rehayem says. "So, who else was going to establish that brand in front of a borrower? It was going to be the brokers."

And without a shopfront of their own, brokers didn't just refer business to non-banks; they effectively were the business.

It wasn't just a case of one side servicing the other either. Broker and non-bank lender had to build trust simultaneously, forging something that looked less like a vendor relationship and more like a joint venture. Rehayem describes the broker channel as, in some ways, indistinguishable from Pepper Money's own people.

"It was practically like us investing in our own staff," he says. "We always saw an investment in the broker channel as an investment by default to Pepper."

That thinking, he says, is why the relationship has held: "They're like a true form of business partnership with a twist. It's like we've got a JV in this, you know what I mean? We've suffered the highs and the lows together. We're in it together."

But you don't need to take his word for it.

From the mouths of mortgage brokers

Mortgage broking stalwart, inaugural Broker of the Year and inaugural MPA Top 100 #1 broker Katrina Rowlands (pictured, below) has watched the entire arc from the other side of the desk.

"Of all the lenders in the industry, non-bank lenders have been at the forefront of dynamic evolution," says Rowlands, whose brokerage, Mortgage Success, is still going strong after 29 years. "What was once seen as a lender of last resort is now a highly recognised necessary panel lender to any mortgage broking business."

The shift runs deeper than reputation alone, she says: the sector has moved away from pricing solutions purely on high fees and rates, towards products tailored to each client's specific needs and best outcome. Rowlands points out that the products on offer today bear little resemblance to those from the sector's early years, with a broader, higher-quality range now giving clients genuine choice.

Asked what type of client she would happily suggest a non-bank option to today that she wouldn't have 20 years ago, Rowlands doesn't have to look very far.

"Myself! The options of non-bank product and choice and features can now appeal to very savvy and very successful and professional clients," she says. "Years ago, it may have been thought to only offer the product suite and cost to 'desperate' or 'difficult' clients. Now, these solutions can be the best outcome for many situations and many varied clients. Rates, fees and charges are now not a barrier to entry for great clients to consider."

That change on the client side has been matched by a change in her own lender panel. "The choice of high-quality non-bank lenders has dramatically increased," Rowlands says. "I don't see them falling over each other and creating an oversupply of lender options, but they seem able to really support a mortgage broker's business and fill needed gaps. The choice of non-bank lenders is supported by need. Thankfully, the number of options has increased."

Atelier Wealth founder and MPA Top 100 Broker Aaron Christie-David (pictured, above) puts a number on how far non-banks have extended into the mainstream of his own business: they now make up between 30% and 45% of his loan book, trending towards the higher end during periods of elevated investor activity.

Christie-David believes Pepper Money, in particular, has earned that volume through product innovation and service quality that cut against the sector's old reputation – pointing to top-notch onboarding processes and product breadth spanning asset finance, personal loans, residential, commercial and SMSF lending.

He frames the distinction between majors and non-banks as one of temperament rather than tier. Majors and second-tier lenders operate strictly by policy, he says, while non-banks are more willing to hear the context behind a deal. "Non-banks ... almost thrive in the grey, whereas the majors are black and white," he says. "Whereas non-banks are like, 'Hey, we're open for business – give us some explanation; give us some context.'"

Unconditional Finance founder and 2025 Broker of the Year – Residential winner Chris Raymond (pictured, below, accepting award from FBAA chief executive Peter White), who built his broking career after the APRA-era shift Rehayem describes below, has nonetheless seen the perception of non-banks change significantly over the first decade of his career.

"We have seen the non-bank space mature as they invest in tech, bring competitive prime options to the table and niche down on policies that the major banks can't compete with," says Raymond. He traces that shift back to his own early days in the industry, when non-bank lenders were seen strictly as a last resort – typically considered only for clients with defaults, bad credit, or a profile that didn't fit the banks' policies.

Today, he considers a non-bank option from the outset for investors, complex income earners and the self-employed. "The focus is no longer to get the loan across the line with a major or mainstream bank," he says, "but on which lender can best meet the customer's needs and objectives."

That shift has also changed where Raymond looks for lending intelligence. BDM relationships remain valuable, he says, but carry less weight over lender selection now that credit policy is easily accessible via AI tools, lender portals and comparison platforms. He still sees a place for education sessions, particularly for newer brokers – though for his own business, a quick BDM catch-up on policy changes and niche reminders tends to be more useful.

Asked what he'd like non-banks to build next, Raymond points to the back book rather than new business: tech that would let brokers review existing settled loans, with live rates, remaining terms and repayment details on hand, to better retain and nurture their client base.

Raymond expects the line between banks and non-banks to become increasingly blurred. "If I were interviewed in 20 years' time, as a veteran, I suspect the view of non-bank lenders being an alternative lender will seem as outdated as dial-up internet," he says. "They will simply be another established and trusted partner of the lending landscape, in line with the current first-tier lenders."

"The options of non-bank product and choice and features can now appeal to very savvy and very successful and professional clients" — Katrina Rowlands, Mortgage Success

Ikaya founder Janine Wade (pictured, below) agrees. "I think we'll look back and wonder why we ever separated lenders into banks and non-banks," she says. "Clients increasingly care about outcomes, speed, flexibility and service, not the institution's funding model. As technology advances and lending becomes more data driven, I expect non-bank lenders will continue to innovate and capture greater market share by responding more quickly to changing customer needs."

Wade's view of the non-bank sector has shifted markedly over her 13 years of mortgage broking in Australia (following 10 in the UK). She says, "Today, non-bank lenders are an essential part of my lending toolkit. As my client base has grown, especially with experienced property investors, self-employed business owners and clients building complex portfolios, I've found that non-bank lenders often provide solutions that simply aren't available through the major banks."

Times of change

Rehayem recalls the global financial crisis (GFC) as a true stress test for the non-bank sector. The handful of brands that stayed in operation right through the period – without abandoning their broker relationships – effectively laid the foundation that every non-bank in Australia still stands on today.

The scale of that shake-out is easy to underestimate now. "We had probably around 15 non-banks exit the industry in a blink of an eye – like literally leaving brokers and their customers stranded, saying, 'we are not settling your loan,' that was going to be settling in 24 hours," Rehayem recalls. "And that's because they didn't have all the belts and braces and risk and governance all set up, and the way that they're supposed to prudently fund their business."

Having weathered the worst financial crisis in living memory while continuing to back the brokers who backed them, those few operators – Pepper Money among them – earned something the rest of the sector has been building on ever since: trust.

The next major turning point was smaller in scale, but no less influential.

"One of the pivotal moments was when APRA stepped in and clamped down on the banks around investment and interest-only lending," Rehayem says.

The finance industry had only just regained post-GFC momentum when the major banks were abruptly forced into tightening their lending criteria, leaving brokers with fewer options. Non-banks were only too happy to fill the gap. "There was a significant number of brokers who had never used non-banks before that were forced to – or lose the business," Rehayem says.

What began as necessity turned into loyalty. "Those brokers that had never used non-bank before, and then used Pepper, became advocates till today," Rehayem says. "They got a taste of non-bank customer centricity. It's all about them, it's all about the customer. It's not about this mentality that we are too big to fail and you need us." Some of the brokers who came to Pepper reluctantly during that window, he adds, are still among the lender's top writers today.

The numbers speak for themselves: Pepper Money's broker utilisation – the number of brokers writing at least one Pepper Money loan in a 12-month period – hit a record, growing by up to 300%.

Broker dominance, and a diversification problem

That growth mirrors a wider shift in the balance of power between brokers and the banks. Broker market share has climbed from roughly 10–12% before the GFC to around 81% today – a rise Rehayem attributes to brokers filling the community role once held by local bank managers as the majors closed branches and pulled back on staff training. "The bank managers back then, who held the golden pen on decision-making and everything else, were part of the chamber of commerce, part of the community, in droves," he says. "Well, today, that's the broker."

He's less sanguine about how quickly brokers have diversified beyond the mortgage itself. "It's taking them far too long to adapt and diversify into different asset classes," he says. "Really, at the end of the day, the only time you see most of the brokers really pivot ... is if there's an issue – they use the adversity as, 'okay, I need to do so.' It's an emergency thing as opposed to a strategic thing." He believes brokers will only hold onto their current market share if diversification is "entrenched into their processes, into their scripting, into the way that they communicate and engage with their customers" – warning that "if they don't, then another industry will."

Tech-led growth

Much of the sector's evolution comes down to technology investment the wider market was slow to make. As dry as it might sound, Rehayem points to comprehensive credit reporting as one of the most significant shifts at the point of loan origination.

"We had to scour through hundreds of pages of statements to understand if they've missed payments, and understand their spending habits," he says of the old process. "Where today, at a touch of a button, you're able to receive the comprehensive credit report of a customer that tells you every liability that's outstanding, their payment history for the past 24 months, and you've got a solid score that is an all-rounder, not just a negative score."

Pepper Money was the first non-bank to adopt NextGen's ApplyOnline lodgement platform, and the first to go live with comprehensive credit reporting – both decisions made well before the rest of the market saw the case for it. "Back then, no one wanted to do it, because it was too big of a burden, it's too big of an investment," he says. "No non-bank nor broker will be able to see the future successfully without significant investment in technology."

An active funding market

The sector's funding model has been rebuilt just as thoroughly since the GFC. Australia now ranks among the top three or four most active issuers of residential mortgage-backed securities (RMBS) and asset-backed securities (ABS) globally, trailing only the US in volume outside state-directed issuance in China – with non-banks the most active issuers, drawing capital from Europe, the US and beyond.

"You cannot falter in an RMBS or ABS deal," Rehayem contends. "You've got to make sure you have an unblemished track record, because what happens then if one non-bank fails? It sends ricochets right through the whole ecosystem." He believes newer non-bank entrants, many without direct memory of the GFC, carry a responsibility to understand what that history cost the sector that survived it. "Hindsight plays a material part in foresight," he says.

Compliance, fraud and the case for unity

Rehayem is candid, too, about the pressures still facing the channel today – rising compliance obligations, an industry-wide focus on Best Interests Duty (BID), and negative press around home loan fraud among them – but argues the response has to be collective rather than fragmented.

"This cannot be approached in a fragmented way," he says. "We have to band together as an industry, and we've got to support one another to be able to eradicate any form of negativity that is being shown on the broker community."

He notes that fraud isn't confined to the broker channel. "I can almost guarantee you that any kind of fraud that happens through the broker community also happens through the proprietary channels of the banks," he says. "The problem is we all know where the media and the press will shine the light, and unfortunately that will be towards a broker more so than proprietary."

His proposed fix is a national register to identify bad actors and referral-style agents operating outside proper channels, backed by more open dialogue between lenders, aggregators and brokers. "It can't be done in silo," he says. "This is an industry issue, not a single lender problem or a single aggregator problem or a single broker problem."

The next chapter

As MPA marks its 25th year, the evolution of non-bank lending mirrors the evolution of mortgage broking itself. Through thick and thin, a quarter-century of steady advocacy, product innovation, and standing by brokers through hard times has truly turned a last resort into a first call, and a fringe distribution channel into something closer to a genuine partnership.

Asked what he'd want an industry headline to say in five or ten years, Rehayem doesn't overreach. "It'll be great to read a headline that says that the brokers have continued their dominance in the community, in the ecosystem, in the industry, and they're still heavily backed by these non-banks," he says.