Non-Banks Post Record Results Amid Mortgage Downturn

Australia's mortgage market is telling two very different stories at once. At the major banks, new lending is going backwards: ANZ, NAB and Westpac have all reported double-digit falls in home loan application volumes through 2026, and the broader market data shows the same pattern. Yet a few streets over, in the non-bank sector, 2026 has been a record year. Pepper Money, Liberty Financial Group and AFG have all just posted their strongest results in years, and specialist lenders like La Trobe Financial are growing their loan books faster than at any point in recent memory.

For borrowers, brokers and anyone watching the property market, that divergence is the story of the year. Here's what's actually happening, and why.

The numbers behind the non-bank surge

Pepper Money capped off the reporting season with what it described as its strongest ever half-year result. For the six months to 30 June 2026, the ASX-listed lender posted total loan originations of $6.3 billion, up 40% on the prior corresponding period, with mortgage originations alone surging 63% to $4.5 billion, the highest half-year figure in the company's history. Assets under management climbed 20% to a record $24.0 billion, and pro-forma net profit after tax rose 15% to $53.9 million, even after the company lifted its loan loss provisioning to reflect a more cautious economic outlook.

Liberty Financial Group told a similar story for the full year to 30 June 2026: statutory net profit after tax rose 8% to $144 million, underlying NPATA grew 7% to $156 million, and the group raised $4.7 billion in new funding over the year, a sign that wholesale and institutional investors are still backing the non-bank model even as the broader lending environment tightens.

AFG, Australia's largest mortgage aggregator and a bellwether for where broker-written loans are actually going, reported FY26 net profit after tax of $49 million, up 39% on the previous year, with EBITDA up 32% to $74.4 million on record settlement volumes across its network. Meanwhile La Trobe Financial, one of the country's longest-established non-bank credit specialists, passed $25 billion in funds under management in August 2026, up from $20 billion as recently as mid-2024.

Taken together, industry analysis puts the scale of the shift in stark terms: non-bank (non-ADI) lenders have recorded roughly a 65% year-on-year jump in home loan activity in 2026, at the same time as the major banks have been tightening credit standards and losing share of new lending.

Why the banks are going backwards

None of this is happening in isolation. The Reserve Bank lifted the cash rate through the first half of 2026, taking it to 4.35%, a reversal of the rate-cut expectations many borrowers had been banking on, and inflation has stayed stubbornly above target, with CPI running at 3.5–3.8% and unemployment ticking up to 4.5% in July. Growth has slowed to a crawl, with GDP expanding just 0.4% in the June quarter. It's a backdrop that has made banks noticeably more cautious at exactly the point borrowers need more flexibility, not less.

Layer a major tax reform on top of that. The May 2026 Federal Budget curtailed negative gearing to new housing only and replaced the 50% capital gains tax discount with cost-base indexation and a 30% minimum tax rate for property purchased after budget night (effective from 1 July 2027). The Property Investment Professionals of Australia has warned that established investors have "almost vanished" from the market as a result, with investor lending down around 8.6%. That's lending banks would ordinarily have written.

At the same time, the big banks have their own distractions. ANZ's $4.9 billion acquisition of Suncorp Bank is progressively migrating 1.2 million customers through to 2027, and tighter full-doc lending criteria are expected to follow, likely pushing more self-employed and non-standard-income borrowers toward alternative lenders. And from July 2026, open banking data-sharing rules were extended to cover non-bank lenders too, closing a gap that used to give the majors an edge in assessing a borrower's real financial position.

Where the growth is actually coming from

Non-bank lenders have always positioned themselves as the option for borrowers who don't fit a standard bank credit box: the self-employed, recent migrants, and anyone with a complex or non-standard income. What's changed in 2026 is the sheer number of borrowers who now fall into that category, at a moment when banks are less willing to make exceptions. Brokers have been the conduit for a lot of that shift, and roughly eight in ten new home loans in Australia are now written through a mortgage broker rather than a direct bank application, a record share, and brokers have increasingly steered complex-income clients toward lenders willing to look past a rigid checklist.

A note of caution

None of this means every corner of non-bank and private lending is risk-free. ASIC has flagged concerns about parts of Australia's less regulated private credit market this year, following the collapse of a NSW-based lender. It's a useful reminder for borrowers and investors alike: not every non-bank lender operates the same way, and it's worth checking that any lender you deal with holds a genuine Australian Credit Licence and a track record to match, rather than assuming "non-bank" is a single, interchangeable category.

What it means going forward

The headline results from Pepper Money, Liberty Financial, AFG and La Trobe Financial aren't a one-off. They reflect a market where a meaningful share of borrowers, including self-employed people, property investors navigating new tax rules, and anyone whose finances don't fit a standard bank template, are finding that a specialist lender, rather than a major bank, is now the more realistic path to finance. If you've been knocked back or slowed down by a bank in the current environment, it's worth having a conversation with a broker or a specialist lender about what your options actually look like before assuming the answer is no.

This article is general information only and doesn't take into account your personal financial situation. Speak with an IQ+ Loans mortgage broker for advice tailored to your circumstances.