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Non-bank Pepper Money has unveiled an innovative new fixed rate interest product that will offer customers a fixed interest rate home loan for two years with no break costs.
Designed to provide customers with “peace of mind when it comes to their home loan”, the limited time offer frees customers from the additional break costs most traditional lenders impose. It's understood that few if any other lenders have made such an offer in the market.
Pepper Money said customers have the flexibility to make extra repayments to pay down their loan faster or switch to a variable interest rate option at any time without incurring break cost fees.
Pepper Money general manager, mortgages and commercial, Barry Saoud (pictured above), said the progressive product offer was developed in response to borrower sentiment in the current market.
“Our research shows borrowers want rate certainty to help with increasing living costs pressures and the potential for further cash rate increases.”
“We understand that customers value flexibility when it comes to managing their home loan, and that’s why we’re thrilled to introduce this new offer which gives customers a competitive interest rate and certainty for two years that their rate won’t change - but also provides the freedom to make changes to their loan without incurring any significant additional costs.”
Pepper said the product offered a capped and competitive interest rate, giving customers certainty while rates are rising, while supporting them with a variable interest rate loan, if rates drop.
The two-year fixed interest rate is offered at parity with the corresponding variable interest rate – starting from 5.59% (or a comparison rate of 5.77%).
“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 ten RBA cash rate increases already announced,” Saoud said.
“Your customers can enjoy the certainty of a fixed interest rate loan while rates are rising and may elect to benefit from the flexibility of a variable interest rate loan should rates drop. So, if the market moves, your client can too.
He said Pepper’s timely solution eases the pressure and anxiety of rate increases. “We’re offering Australians impacted by real life cost of living pressures repayment certainty – giving them one less thing to worry about”.
“As far as I know, today we are the only lender in the country with a proposition like this: a two-year fixed rate option that is at parity to the corresponding variable rate with no break fees, and is available across the full credit spectrum - prime, near prime and specialist options. It’s a no brainer in this environment,” Saoud said.
Director of Xcel Finance, Kimberly Linder said the product flexibility is a 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.
“As a broker of 15 years, I have never come across such an innovative product that provides both certainty and the flexibility to change if markets change,” she said.
Michael Goerner, head of Connective Home Loans, said 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 its partnership with Pepper Money.
“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.
National sales manager of AFG Home and Commercial Loans Hayden Cush welcomed the solution.
“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.”
