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The non-bank lender has announced it has decreased its serviceability buffers as part of a new package of options to help brokers and clients.
Non-bank lender Pepper Money has introduced its “Red Hot Rates Package” to help address “real life challenges” across key areas of concern for brokers and their clients. As part of the package, Pepper Money has lowered serviceability buffer rates to 2 per cent across the board.
In addition to the lowered buffer, Pepper Money has announced the package will cut interest rates from 50 to 164 bps as well as home loan terms of up to 40 years.
Pepper Money chief executive Mario Rehayem said the challenges faced by brokers and their customers required a response from lenders, as more challenges are likely to be on the horizon.
“Australians are under pressure – persistently high inflation and interest rates are putting pressure on household budgets, and in many cases creating mortgage stress in addition to other cost of living challenges,” Mr Rehayem said.
“We are unlikely to see rates ease until 2024, suggesting the road will continue to be bumpy for borrowers for some time.”
Although the Reserve Bank of Australia (RBA) held rates steady in September at 4.1 per cent, there’s still chance for another rate hike in the coming months as inflation persists at high levels.
On this, Mr Rehayem commented: “In this environment, it’s nerve-racking to be a borrower, and we know brokers want to do all they can to help customers through this time.
“Pepper Money’s BDMs can help brokers to find a serviceability solution for their customers. We make it easy. Our Pepper Product Selector can provide an indicative response in under five minutes and we have an accessible credit team who are always ready to workshop any scenarios.”
This announcement from Pepper Money is the latest in lenders over the last few months adjusting their serviceability clients for refinancing customers, such as AFG Home loans, which launched the AFG Home Loans Retro Switch that enables AFG brokers to offer refinancing on a reduced buffer of 1 per cent for eligible customers.
Three out of four of the major banks – NAB, CBA, and Westpac – have also tweaked their buffers in the past few months in order to assist more borrowers to refinance.
Currently, the Australian Prudential Regulation Authority (APRA) requires banks to apply a 3 percentage point buffer on top of the product rate when establishing whether or not customers can service a mortgage.
Chair of APRA, John Lonsdale, recently wrote banks to remind them of the regulator’s expectations when it comes to managing exceptions to housing lending policy and warned that banks reporting large volumes of policy exceptions will be subject to “heightened supervisory attention”.
[RELATED: AFG launches reduced buffer home loan]
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