Future Mortgages is to enter the Australian mortgage market with the launch of Pepper Home Loans, offering a range of deals based on its UK products.
A funding line of A$250 has already been secured from Merrill Lynch (Japan) and the lender carries the backing of the Friedman, Billings, Ramsey Group, the parent company of Future’s UK operation.
With a value of A$90bn the Australian mortgage market is approximately a third of the size of the UK’s. Around 90% is accounted for by traditional banking operations. Building societies hold 4% of the business, with the remaining 6% held by niche and second-charge lenders. As a result, sub-prime lending in Australia is nowhere near as advanced as it is in the US and the UK, and Pepper will be the first lender to enter the market.
Michael Bolton, sales and marketing manager at Future Mortgages, said: “The sub-prime market is very underdeveloped in Australia. The mortgage market is dominated by banks selling flexible products. So far, no mainstream lender has entered the sub-prime market over there.”
Pepper’s product range will be based on Future’s UK operation, but Bolton said that it will be lending with more caution. “We are not going to offer such an extreme level of sub-prime deals as we are the first lender to enter the market. We think it is prudent to assess the market toe-by-toe rather than jumping in feet first.”
Like any developed country, Australia has similar levels of adverse credit history to the UK and the US, added Bolton.
Brian Pitt, sales and marketing director at Future Mortgages, is confident Pepper will make its mark in the Australian market. “Pepper has a close relationship with a large national broker in Australia. We are also building relationships with large institutional lenders to look for referral business to help those bank customers who may be unable to obtain a loan because they do not fit the mould.”
Over the next 12 months the lender expects to conduct the equivalent of £140m in new business.