BARRY There is no doubt this is the hot topic with investors, because the headlines are spectacular. But from our conversations with investors, they understand things like the structural supply deficit of housing, population growth in Sydney and Melbourne, and stratified data on housing by value and dwelling type. They also understand the market is not homogenous. Investors are generally comfortable that there won’t be a crash and what we are seeing now is a normal part of a cycle.

BYRNE Our experience is also of investors asking nuanced questions about the housing market, such as on constant prepayment rate (CPR), rather than whether this is a correction or a crash. They all appreciate the Australian economic update with which we tend to lead off our presentations.

As a general statement, international investors are comfortable that what they are seeing is a correction so they are not overly concerned. They understand that there is not a single homogenous market but rather six or seven markets at different stages of the cycle, and within each of these markets there are at least three subcategories. It has been helpful to position the segments in which Pepper participates as a lender.

BARRY Everyone is watching to see how it plays out. But there is broadly an acknowledgement that there won’t be a sharp correction overnight.

MARSDEN We were in the US in August, marketing a nonconforming transaction. The majority of the accounts we met have derived a level of comfort and understanding about the dynamics at play in the Australian market.

Even in some of the downside scenario discussions, we found their understanding of market fundamentals and the robustness of capital structures to be good.

If you look at an Australian prime or nonconforming structure and put it alongside some of the nonagency structures from the UK and the US, there is a very convincing argument about the relative safety of Australian product. This is particularly true in the nonconforming sector, where there is at least 30 per cent credit support in triple-A tranches.

RIEDEL Five years ago, property was always the dominant conversation with investors in Europe given the perception that the Australian market would crash because all other markets did. There was scepticism in every conversation we had.

Nowadays there is more information available, we are well removed from the financial crisis and the property market demand-supply conversation we have explained has been realised for all to see. There is more belief from investors today about the stability of our property market.

PLOUGHMAN It is amazing what time does.

AUSTIN It is. The weekly UBS media scare campaign loses credibility. What we see investors focusing on is not the UBS scaremongering but rather the impact of untested themes like the royal commission and the tightening of regulation.

For example, what these more practical pieces do to CPRs and where the volume going to nonbanks comes from. These are the real questions that come up.

PLOUGHMAN The really important thing from our perspective is the performance of the underlying mortgages. You can talk about property values until you are blue in the face, but you only rely on property value when someone doesn’t pay.

We have the best underlying quality of mortgages, even surpassing that of the Netherlands. Australian borrower behaviour is world class and we have many years of evidence to support this – which means investors believe it.

They know debt levels are high. We don’t shy away from this, because it is true. But James Austin’s comments around CPR are interesting. CPR in Australia is very different compared with the rest of the world in the sense of what drives it and why. Again, this is about behaviour.

MARSDEN We received harder questions about prepayments in the US than we did on any macro issues.

PLOUGHMAN Investors are still smarting from what happened to CPRs in the UK. When interest rates went to zero, no-one paid anything back. Investors had all bought bonds with specific weighted-average lives and they ended up having nothing paid off. We have consistency around CPR performance in Australia.

PLOUGHMAN It is an interesting question, especially when you think about what might drive this. I would have thought the one thing that might cause lower CPR would be higher rates. As long as interest rates are low, we see people – even interest-only borrowers – paying their loans down.

BARRY Reduced availability of credit to refinance could result in a slower CPR. We aren’t seeing this yet, however.

PLOUGHMAN The issue around availability of credit is that the banks may be harder to deal with. But there are alternatives.