Broker channel welcomes Pepper Money fixed-rate loan innovation

Pepper Money said the product — which is initially being offered for prime, near prime and specialist fixed-term loans lodged between 17 April -12 May 2023 and formally approved by 19 May  — is offered at parity with the corresponding variable interest rate.

Rates for the product offering start from 5.59 per cent per annum (comparison rate 5.77 per cent p.a. based on a secured loan of $150,000 and a term of 25 years). 

It has repotedly been designed to “provide customers with peace of mind when it comes to their home loan as they will be able to lock in a competitive interest rate for two years without having to worry about the additional break costs that most traditional lenders impose”. 

As such, it aims to give customers “repayment certainty” in this rising rate environment, and the option to move to a variable interest rate loan should rates drop. 

Borrowers using the product will also be able to make unlimited additional repayments and can rate lock the interest rate for 90 days (rate lock fees apply), according to Pepper.

Pepper Money’s general manager, mortgages and commercial, Barry Saoud, said the product offer was developed in response to borrower sentiment and broker demand in the face of a rapidly changing rate environment.

He flagged that broker customers could therefore “enjoy the certainty of a fixed interest rate loan while rates are rising” along with the flexibility of a variable interest rate loan should rates drop.

“So, if the market moves, your client can too,” he said.

“It’s a no-brainer in this environment.

“Our approach to product innovation is grounded in our mission to help people succeed. So, as we listen to our brokers and their customer needs and concerns — we are able to act quick.”

Members of the broking industry have welcomed the move, with broker and director of Xcel Finance, Kimberly Linder, commenting the product flexibility was “testament to Pepper Money’s innovative strategies”.

“They have listened to their customers and once again come up with a solution. This is exactly what mortgage holders are seeking in this current rising interest rate and rising cost of living environment. It also allows the flexibility to break the fixed rate with no penalties should rates start to drop,” she said.

Pepper Money’s new fixed-rate solution comes after Pepper Money research found that borrowers want rate certainty to help with increasing living costs pressures and to guard against potential future cash rate increases.

Mr Saoud said: “We know many Aussies are anxious about how they would cope and are looking for greater certainty given the potential for further rate rises on top of the 10 RBA cash rate increases already announced.

“We’re offering Australians impacted by real life cost of living pressures repayment certainty — giving them one less thing to worry about.”

Members from the aggregation space have also welcomed the launch.

Michael Goerner, head of Connective Home Loans, commented: “Continual product and policy innovation which better places broker to deliver real solutions for their customers as market conditions change is one of the most valuable qualities in our partnership with Pepper Money, funding our “Solutions” brand. They have made it easier for brokers to help their clients. 

“For all those clients rolling off fixed rates that are looking for next steps, this is a really good solution and with no break costs it is an absolute safe bet each way, rates go up and you are sheltered, rates go down  and you are okay to jump off and ride the rate slide with no penalty,” he said. 

Similarly, Hayden Cush, national sales manager of AFG Home and Commercial Loans said: “The Pepper Money team have consistently been a market leader with their product  innovation, and ability to produce products that meet market demands in an everchanging lending environment. 

“Given the aggressive nature of the RBA rate increases since May last year, a number of consumer  household budgets are being stretched, and will continue to be stretched, with further rate increases still expected. 

“The new fixed rate offering now available via our Options suite (funded by Pepper Money) comes at a time when consumers may be looking for some certainty in their outgoings,” he said. 

[Related: 50% of fixed-rate loans to expire in September, Aussie warns]