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Pepper Money Limited (Pepper Money) has released its full-year calendar results for the 12 months ended 31 December 2022 revealing it originated a “record” $9.6 billion in loans for the year, up 14 per cent on the year before, taking its asset under management to $19.2 billion.
The lift to its total loans comprised $6.8 billion from its home loan book — up 7 per cent, to a total value of $13.5 billion, of which most was made up in the first half of the year ($4.1 billion).
The fall in new lending in the second half of the year comes at a time when consumer confidence is falling, on the back of rate rises and higher cost of living.
Despite the easing, chief executive Mario Rehayem told Mortgage Business the worst from softening perspective in the mortgage market has passed.
Looking ahead, he said: “This is from our perspective a concerted effort to have a bit of a rebound this year, from the back half of last year.
“The mortgage broker distribution network is vital to that — 95 per cent of our mortgages are originated from mortgage brokers.
“We’re very proud of that because we are very much aligned and understand the mortgage brokers.
“All of our processes and the way that we have built our technology stack really does complement that interaction between a mortgage broker and the borrower and the customer.”
The results also revealed in the second half of the year a fall in mortgages from its “prime” customers (47 per cent compared to 55 per cent in the first half), with near-prime customers increasing up to 47 per cent.
Mr Rehayem expects the non-conforming market will be one of the “fastest-growing markets over the next couple of years”.
“The reason for that is because of the significant rate rises that have happened over the last six to eight months,” Mr Rehayem said.
“Unfortunately, there will be a number of customers, bank customers, especially that would have missed payments along the way and they will get to a point where they want to refinance.”
This will bring new opportunities for Pepper Money that can service those customers, “rather than auto decline”.
The results also revealed asset finance increased 35 per cent to $2.8 billion, which follows the removal of clawback for its commercial lending products as the number of mortgage brokers writing commercial finance loans has increased.
While Mr Rehayem noted the issue of clawbacks was “constantly under review”, no immediate changes were in the pipeline.
Growth to RMBS strategy
The results highlighted it had increased its warehouse lines 14 per cent to the value of $11.3 billion and completed six residential mortgage-backed securities (RMBS) transactions and one asset-backed securities (ABS) transaction in CY22, raising over $5 billion.
Meanwhile, the lender has recently priced its first public securitisation in 2023, upsizing to $1 billion, designed to optimise the funding of Pepper’s Australian mortgage originations, the lender explained.
The company confirmed that Pepper Money’s PRS (Pepper Residential Securities) program comprises a mix of non-conforming and prime mortgages.