Applicants are treated equally, non-bank says
As each borrower’s situation is unique, home loan applications should be assessed on their individual merit rather than by a blanket approach, Pepper Money says.
The non-bank lender, which caters to credit impaired and self-employed borrowers, provides flexible home loan options to suit individual needs.
Pepper Money NZ country head Campbell Smith (pictured above) said that the lender treats applicants as individuals and therefore does not require them to conform to a fixed algorithm.
Both self-employed and PAYE borrowers represent “great opportunities and a great fit” for Pepper Money’s product offering, he said.
“In any circumstance, we always aim to deliver the best experience - together with the best outcome possible - and find our way to a ‘yes’,” Smith said.
Using changes to the Credit Contracts and Consumer Finance Act (CCCFA) as an example of the Pepper Money difference, Smith said that while the changes, when introduced at the end of 2021, represented a challenge to all lenders, Pepper Money continued to uphold its approach of being “consistent and predictable”.
This meant the non-bank lender set out to deliver an equivalent experience to borrowers, irrespective of their employment situation, he said.
“We endeavour to assess any applicant in the same way regardless of their vocational circumstances, Smith said.
Distinct from mainstream lenders, Smith said that the non-bank lender seeks to engage with advisers at every opportunity via its business development managers or alternatively, its credit team.
This means that mortgage advisers are able to get answers to their questions, and it’s not uncommon for an adviser to call the credit team directly to discuss a challenging circumstance or unusual scenario, he said.
Pepper Money’s approach typically involves a quick phone discussion, following by “workshopping”, where the applicant’s details and scenario are worked through to identify the right solution. This often gives rise to an approval that other lenders could not provide, he said.
“If you have a customer who isn’t finding the terms they need with other lenders, then give Pepper Money a call and if we can help, we will,” Smith said.
Discretionary expenses as part of affordability testing
In reference to the removal of discretionary expenses from affordability testing (as part of the CCCFA changes introduced from May 4), Smith said that Pepper Money continued to take a pragmatic approach, treating its customers as responsible adults.
While one adviser said they were unsure how banks would treat discretionary expenses that were regular outgoings (such as Netflix), Smith said that Pepper Money took the view that borrowers would adjust their lifestyle to meet their current circumstances and commitments.
That may mean that breakfasts at a local café are reduced or cut out altogether, to prioritise mortgage repayments.
“When we support a customer into their first home and they commit to reducing discretionary expenses, such as meals out or subscription services (or that additional pair of jeans or limited edition trainers that they don’t really need), we’ll take that scenario as presented,” Smith said.
The non-bank lender would also take into account that the customer would be working with their adviser to help them reach their financial goals, knowing that they take the associated responsibility and opportunity seriously, for which associated sacrifices may need to be made, he said.
Smith said that Pepper Money’s alt doc offering allowed self-employed applicants to provide alternative forms of proof of income (e.g. management financials or tax returns), rather than a full set of financials, and that uptake had been increasingly high.
Its full doc application process is well-honed, and can provide approval within 24 hours, he said.
Opportunities for advisers in 2023
Smith said that recent changes to LVR restrictions result in a greater capacity for mortgage advisers to support their clients to achieve their financial goals, whether it be to buy their first home or an investment property.
With some predictions that have entered into a period of stability, and property value declines starting to moderate, now is a good time for advisers to reconnect with their client base, to assess their needs and property aspirations, he said.
“Pepper Money is open for business and here to deliver solutions for advisers’ clients across a wide arrange of scenarios and personal circumstances,” Smith said.
The non-bank lender continues to help Kiwis to succeed, given financial inclusion is at the heart of Pepper Money’s mission. And in this market, when many Kiwis are under considerable stress, having options to offer your clients can make a real difference to them - and your business.
