ASX-listed lender lender posts record originations despite wider post-Budget slump
Pepper Money has delivered a record first half for 2026, posting $6.3 billion in total originations and $24 billion in assets under management (AUM) even as Australia's major banks report double-digit falls in mortgage application volumes following the federal government's May Budget changes to negative gearing and capital gains tax.
The non-bank lender's half-year results released this Thursday showed mortgage originations of $4.5 billion for the six months to 30 June, up 63% on the prior comparative period and the highest half-year figure in the company's history.
Asset finance applications comparatively underperformed – while they increased by 2% to $1.7 billion, total AUM declined 4% year on year. Asset finance arrears also increased.
Total AUM climbed 20% year-on-year to a new record, while pro-forma net profit after tax rose 15% to $53.9 million.
The result stands in sharp contrast to the picture emerging from the big four banks over the past fortnight.
Big four report mortgage declines
Westpac was the first of the majors to report, with its third-quarter update showing a 20% fall in mortgage applications since the May Budget, alongside a forecast that investor housing credit growth will nearly halve heading into 2027. The bank's shares fell as much as 5.9% on the news – their worst day since April 2025.
Commonwealth Bank followed with its full-year result, flagging a 15% drop in home loan applications despite what it described as its strongest broad-based growth across core domestic categories in 15 years.
ANZ then reported a 12% decline in the value of mortgage applications since the Budget, even as the bank posted a $1.9 billion quarterly cash profit. NAB rounded out the reporting season with a 15% fall in home loan applications over the June quarter.
Together, the big four control more than 70% of Australia's home lending market, and all four have now linked the slowdown to the same trigger: the scrapping of negative gearing and the capital gains discount announced in May.
Broker network data has told a similar story. Loan Market Group's July 2026 market report found total home loan lodgements down 26% nationally since February, with investor mortgage applications plunging 35% by value – the steepest decline of any borrower category tracked. "The last six months have been challenging for many buyers," Loan Market executive chairman and chief executive Sam White told MPA.
Pepper Money grows against the tide
Pepper Money's own enquiry data illustrates just how far it has diverged from that trend. While total market mortgage enquiries fell 20% in the three months to July 2026 compared with the same period last year, and 15% since the May Budget announcement, Pepper Money's enquiries rose 42% and 11% respectively over the same windows.
Chief executive Mario Rehayem (pictured) attributed the growth to the lender's distribution network and product strategy rather than market conditions. "Our continued focus on product innovation, making it easier for customers and partners to do business with us, and the strength of our distribution network supported 40% growth in total originations on PCP," he said. "Our outperformance in mortgages was clear – with our mortgage business growing seven times system."
The half also brought two major servicing wins. Pepper Money completed its role in a consortium to acquire Westpac's RAMS home loan portfolio on 1 August, adding $15.4 billion in servicing AUM. Separately, Pepper Money will service a roughly $36 billion HSBC Australia home loan and personal loan portfolio following its proposed sale to a Blackstone-controlled entity, expected to complete in the first half of 2027.
"We have successfully migrated $15.4 billion of loans from RAMS, which, together with the $24 billion in assets we already manage, brings Total AUM to just under $40 billion," Rehayem said. "This is a new AUM watermark for non-banks in Australia."
Margins held despite volume surge
Total net interest margin rose 12 basis points to 2.1%, with Rehayem noting the growth had not come at the expense of profitability. The Board declared a fully franked interim dividend of 7.2 cents per share, up 12% on last year's interim, representing an annualised yield of 9.5%.
Looking ahead, Rehayem acknowledged the broader headwinds facing the sector. "Following the Federal Government's changes to CGT, Negative Gearing and Self-Managed Super Fund (SMSF) residential lending, the market has seen a reduction in new application activity," he said, adding that Pepper Money remains focused on product innovation, distribution and AI-driven efficiency tools to manage its cost to originate as conditions tighten.
