Non-banks continue to take share from Australia’s major lenders, despite a challenging market backdrop.
While non-banks can come with higher price tags, they also offer faster approvals, more flexible credit policies, personalised service and a greater willingness to lend to borrowers who may not fit traditional bank criteria.
At the same time, higher interest rates, reduced borrowing capacities, rising living costs, tighter bank risk appetites and increasingly complex borrower profiles are creating more demand for alternative lending solutions.
It's little surprise then that Australia's non-bank sector continues to gain traction as more borrowers, and brokers by extension, look beyond traditional banks for funding options.
"People are starting to understand that it's not just the Big Four banks that can provide home loan solutions," Chris Hall, founder and managing director of Sydney-based brokerage Blue Crane Capital, told Australian Broker.
The numbers suggest that shift is already well underway.
In the June quarter, the value of home loans issued by Australia’s non-bank sector surged 65.2% to $10.49 billion, up from $6.35 billion a year earlier, according to Australian Bureau of Statistics (ABS) data, which was analysed by Money.com.au for a survey.
Home loan lending at major banks, by comparison, grew just 2% during the same period to $87.61 billion, up from $85.41 billion.
But it's not just home loans. Non-banks are steadily carving out more of the lending market, giving borrowers greater choice and faster access to finance across everything from home and car loans, to business lending, to commercial property finance and to other options for wealth creation.
"I've seen a significant trend in the last 12 to 18 months where typical, major banks clients are preferring to go down the non-bank route for ease of the transaction. Speed is big as well, getting the deal done," Hall said. "With the interest rate rises, there's been an impact on borrowing capacity, particularly with self-employed borrowers. They need an alternative."
Examples of the non-bank sector's growing momentum can be seen across the market.
Pepper Money recently delivered a standout first half. The non-bank lender recorded its strongest half-year originations result on record, with total lending rising 40% to $6.3 billion in the six months ending 30 June. Mortgage originations climbed 63%, year-over-year, to $4.5 billion, while total assets under management (AUM) grew 20% to $24 billion.
Non-bank lender MA Money, which is owned by alternative asset manager MA Financial, had a similarly successful first half, with its loan book surging 127% to $7.5 billion. The lender has since surpassed $8 billion, following more than $1 billion in new settlements in the opening months of 2026's second half.
Meanwhile, Australia's Big Four banks have all reported double-digit declines in recent weeks, following the federal government's May budget changes to negative gearing and capital gains tax (CGT).
Westpac's third-quarter results earlier this month showed a 20% drop in mortgage applications since the budget reveal. The bank also expects growth in lending to property investors to nearly halve heading into 2027. Also this month, Commonwealth Bank of Australia (CBA) reported a 15% decline in home loan applications in its full-year results. Likewise, ANZ reported a 12% decline in the value of mortgage applications since the budget, even as it posted a $1.9 billion quarterly cash profit, while National Australia Bank (NAB) recorded a 15% fall in home loan applications over the June quarter.
Other factors are at play too, contributing to the non-banks' growing place in the lending landscape, including consolidation among traditional banks. HSBC recently pulled out of Australia's retail banking sector. In 2022, Citigroup sold its Australian consumer banking business to NAB. Both of these deals have created space for Australian non-banks to compete for borrowers.
"Those international banks are leaving the market. It doesn't make sense for a bank like HSBC to operate like that," said Darren Liu, co-founder and managing director at Sydney-based non-bank lender FinStreet. "And it's not because they don't like the market, or the market isn't big enough. It’s simply because their capital structure, regulatory requirements and organisational setup no longer allow them to do retail banking in the same way. So they’re focusing on institutional banking, which makes more sense for them as a large global player.
"In the long run, it will likely be the same effect for the major four or five banks in Australia," Liu continued. "It may not make sense for them to keep branches open, which is why they’re leaving some regions, closing branches, but keeping one or two very good experience centres in the CBD areas. The reason is that they need to have branches in regional areas because of the leases, the ATMs, the systems and staffing structure. But as a full-licence bank, they can’t just sell mortgages; they can’t have one person sitting there selling mortgages, because that doesn’t make sense. So they’re leaving. But the market is still there. So who is going to take over that market? It makes perfect sense for the non-banks."
Hall added that as non-banks become more mainstream through greater brand visibility and high-profile endorsements — such as Pepper Money's partnership with the West Tigers national rugby league, or La Trobe's multi-year sponsorship of the National Football League — borrowers are becoming more comfortable considering use of them.
"Ten years ago, non-banks were a bit of a taboo thing to mention," Hall said. "But now people are a lot more accepting that the non-banks are a suitable product for them.
"People obviously want to go to a major bank because their rates are cheaper," he continued. "But it's also not just about rates for many people; it's about structure. It's about what their immediate needs are now and having a plan for the future. Things aren't a straight line. And I think we're entering into a time in mortgage broking and finance broking where it's more solutions-based, versus just a rate-driven deal."
