Pepper Money plans to save Australian property owners tens of thousands of dollars by slashing fees.
The non-bank lender has launched a limited-time offer — dubbed the Prime Time Flex Bomb — that temporarily removes lenders' mortgage insurance (LMI), lenders' protection fees (LPFs) and risk fees on prime full-doc property loans. On a $1 million home loan, that could mean the difference of $22,000 for residential homeowners, or $25,000 for investors.
"We are making homeownership and property investment more accessible and affordable for a broader range of clients," said Barry Saoud, Pepper Money's general manager of mortgages and commercial.
According to Pepper, LMI costs are roughly 1% to 5% of the home loan amount, depending on the loan-to-value ratio (LVR) and other lender-borrower specific calculations. With Pepper's limited-time offer, borrowers could potentially save tens-of-thousands of dollars, Saoud said.
“Improved cash flow then allows clients to allocate funds towards property improvements, investments or personal savings, leading to greater financial stability and savings over the life of their loan," he said. "If your client is consolidating debt to improve cash flow this means they’ll have more funds available for the consolidation."
Additionally, Saoud pointed out that the offer is not limited only to certain professions or income levels.
"We've seen favourable LMI and LPF waivers restricted to specific industries or professions, like healthcare, lawyers and government workers," Saoud said. "However, our approach reflects our can-do attitude and our desire to flex our policies to help more people to succeed. Our approach is inclusive, ensuring that a broader range of clients, regardless of what industry they’re in, can benefit from these significant savings.”
Pepper's offer comes as many Australians are struggling with inflationary pressures and a cost-of-living crisis, causing some would-be buyers to abandon their homeowner dreams altogether. The Reserve Bank of Australia's (RBA) 0.25% rate reduction of the official cash rate (OCR) in February, set off a wave of optimism in the market, particularly among first-time buyers, many who are eager to tap into the market. But Tuesday's decision by the RBA to hold rates at 4.10% — combined with rising property prices nationwide — has made the dream of homeownership seem further out of reach for some.
“Australians work hard to achieve the dream of owning their own home. But saving for a deposit and paying LMI remains a huge challenge," said Saoud, referring to the standard 20% deposit needed to obtain a mortgage. "The flexibility we’re offering eliminates the need to pay thousands of dollars upfront for mortgage insurance, making home ownership more affordable at a time when this is a real challenge."
“By leveraging these combined benefits, first home buyers can significantly reduce their initial costs, improve their borrowing capacity and achieve greater financial stability, making the dream of owning a home more attainable," Saoud said.
The executive added that investors can benefit from improved equity and cash position "without payment of an LMI premium upfront."
In addition, Saoud pointed out that while some of Pepper's competitors may offer lower rates, "the lowest rate on offer doesn't necessarily mean your client is better off. It's important to look at the bigger picture."
The limited-time promotion eliminates LMI, LPF and risk fees up to 90% LVR on all prime full-doc residential property loans. The deal applies to both new purchases and refinances, owner-occupies and investors. Pepper Money applies a flat 3% lender protection fee for loans at 90% to 95% LVR. Loans are up to $1.5 million.
Saoud said the larger-than-usual loan sizes — compared with the $1 million loan package that most traditional banks offer — "not only reflects current property market trends, but also offers customers greater opportunities to purchase higher-value properties."
