Product caters for borrowers with clear credit history
A new mortgage product is capitalising on growth in the near prime lending category.
Launched by non-bank lender Pepper Money on Monday, Near Prime Clear caters for borrowers with a generally clean credit history and is in response to demand and growth opportunities in this sector.
Designed for borrowers who sit just outside the traditional prime lending space, Near Prime Clear is now available for brokers and business partners.
Offered at a competitive price point, Pepper Money CEO Mario Rehayem (pictured) said the product was tailored for borrowers who don’t meet standard bank lending criteria.
“These are borrowers who may just be starting out their business, starting out a new job, had a change of circumstances recently, earn variable income, or experienced temporary employment disruptions during lockdowns,” Rehayem said.
It also included industries such as tourism, hospitality, and entertainment, where borrowers had a clean credit history and had been impacted by the COVID-19 pandemic.
“We’re addressing a growing need in the market, by ensuring Australians impacted by real life have access to more competitive pricing,” said Rehayem.
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Which customers does Near Prime Clear suit?
To help brokers identify which of their customers may be suitable for the product, Pepper Money has provided the following guidelines:
- A clear credit history
- A self-employed or PAYG applicant who has just started a new job
- Self-employed customers looking for simple income verification (including one form of income verification, (eg an accountant’s letter declaration or a one-year tax return)
- Customers whose income or employment history doesn’t quite fit the criteria for a mainstream lender
- Customers who want to consolidate their tax debt.
Near Prime Clear also takes into account family tax benefits, such as family assistance payments for dependent children. There are also flexible cash out options for business use, and no limits on the number of debts for consolidation.
At $2.3bn in originations, Pepper Money said in February the near prime category had grown by 100%, compared to December 2020. Combined with the success of the Near Prime Clear pilot, which accounted for 10% of Australian mortgage originations during the last quarter of 2021, Rehayem said under current market conditions, the sector was growing.
“The lending landscape has changed dramatically over the past 24 months. Overall, near prime lending settlements have accelerated, borrower profiles are shifting, and Pepper Money is well positioned to meet the growing demand through product innovation and our market leading turnarounds,” he said.
Amid ongoing global economic instability following the COVID-19 pandemic, residential lending could easily be defined by a growing number of applicants being denied by the primary bank – often one of the big four banks.
As an innovative digital non-bank lender, Pepper Money was focusing on creating financial inclusions where there were gaps, Reyahem said.
“In some respect, market conditions today mirror those when we first launched the near prime category. Increasingly, more and more customers are finding themselves underserved by banks, at a time when they need them the most.
“As we continue to serve more customers than ever before, we’re responding to this growing segment with our innovative home loan options and creating financial inclusion.”
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Barry Saoud, general manager mortgages and commercial lending at Pepper Money, said many brokers were turning to Pepper Money on behalf of their customers, who increasingly required a flexible and fast approach.
Referring to independent research conducted by Fifth Dimension in 2014, which showed the non-confirming market accounted for around 12% of the Australian mortgage market (around $2 trillion in size), Saoud said we’re “only just scratching the surface”.
“Our tech capabilities provide scale and efficiency; enabling us to manage increasing application volumes whilst maintaining our industry-leading turnaround times,” he said.
By investing in product innovation and technology, Pepper Money was able to help brokers efficiently and effectively cater to more customer segments.
Brokers had a golden opportunity to provide flexible solutions for borrowers looking for solutions for their real and unique life circumstances.
“We’ve made it really fast and easy for brokers to find out where their customer fits in Pepper Money’s broad spectrum of loan options through PPS. No other lender in the market today can issue an indicative approval for a near prime loan with a credit check in under two minutes.”
Near Prime Clear is now available through Pepper Money technology tools (Pepper Product Selector) and Resolve (Full Doc and Alt Doc variants).
