Pepper Money saw some eye-catching mortgage origination trends in the first half of 2025, with the product mix leaning heavily into prime mortgages, although this has led to sustained margin pressure on the non-bank lender’s income statement.
Total mortgage originations hit $2.8 billion in the half, up 53% year on year, while asset finance originations climbed 19% to $1.7 billion.
That represents a significant turnaround from the 2024 interim period, when mortgage originations added just 6% while asset finance originations declined 19%.
But the surge in prime mortgage volumes came with pressure on margins. Mortgage net interest income of $157.3 million represented an 8% year-on-year decrease, causing mortgage net interest margins to dip nine basis points to 1.51%.
Pepper Money partially attributed this to prime loans representing a higher percentage of the loan portfolio, comprising a walloping 70% of the originations mix versus just 55% in the previous interim period.
Chief executive Mario Rehayem (pictured) told shareholders it was “an amazing start to the year”.
The Reserve Bank of Australia (RBA)’s rate reduction cycle, improved consumer confidence and a funding market that has “weathered the storm” all played into the strong start to the year.
Group-wide, Pepper Money’s net interest income fell by 8%, once again attributed to growth in prime loans. But net interest margins across the whole group increased by six basis points to 1.98% thanks to cost control and asset finance growth.
Rehayem stressed to shareholders that Pepper Money is able to lean into its asset finance segment when encountering NIM compression in mortgages – a tactic that appeared to pay dividends in the first half of 2025. Literally – a fully franked Interim dividend of 6.4 cents per share was declared.
Shareholders appear more-than-happy with today’s results, with the stock adding over 5% on Thursday.
