“Inflationary pressures continue to inflict pain, driving up the cost of living in households across New Zealand. Interest rates have soared to levels not seen in the past decade. Meanwhile, housing prices remain persistently high. To compound these difficulties, the lending criteria of traditional banks continue to be selective, leaving a growing number of borrowers in a lurch as mainstream loans can seem out of reach and out of touch.”
Surprisingly, anecdotal evidence suggests that a significant percentage of hopeful homebuyers who approach traditional banks for a home loan encounter rejection or limitations on the structure and amount they desire – between 30-40% according to some industry experts.
Smith adds, “Many individuals, upon encountering these obstacles or having been told ‘no’, rarely go on to explore alternative options – they simply stop their search altogether. Perhaps, it feels as if an early knock back may mark the end of the road for these borrowers, but banks are just one option in the world of lending.”
Echoing this sentiment on a recent Pepper Money webinar, Jeff Royle, a prominent figure in the non-bank lending sector shed light on this prevalent issue. He says the lack of awareness about non-bank lenders is an opportunity for financial advisers to educate. According to Royle, Kiwi borrowers are increasingly ‘rate obsessed’ as major banks over many years have spent an “obscene amount of money promoting their interest rates, probably to the exclusion of borrowers knowing little about other avenues for obtaining mortgages.”
Now, more so than ever amidst the economic challenges, Royle says advisers have emerged as crucial facilitators of innovative solutions. There can be a noticeable contrast between the way banks regard and interact with prospective borrowers, and the personal touch a good adviser can provide to clients. Where banks will generally take a fairly black and white approach to assessing individual borrowers, resulting in often transactional decision-making, as a financial adviser, every client represents a real person with dreams, aspirations, and life goals.
“While mainstream bank lending has served the majority well, there is a cohort of individuals that, for whatever reason fall outside of mainstream criteria, and there needs to be a safety net or a solution for those people. Unfortunately, a lack of awareness, consideration, and understanding of non-bank lending options has led to missed opportunities,” says Smith.
In such cases, unconventional thinking and a willingness to challenge the status quo become paramount. This is precisely where Pepper Money steps in, offering a flexible, real-life approach that transcends the checkboxes of mainstream banking.
“As client scenarios grow increasingly complex and diverse, we stand by financial advisers, aiding them in finding alternative options with speed and confidence.
“Pepper Money continually explores non-traditional lending strategies to address the real-world challenges that clients face, from serviceability buffers to approval timelines and, ultimately, securing the necessary financing,” says Smith.
“Our approach is holistic and accommodating. We consider a broad spectrum of factors when evaluating your client’s eligibility for a home loan, including various income sources like part-time and contract work, their past credit history, and their unique goals, such as debt consolidation or accessing cash.”
“Pepper Money, acknowledges that everyone's real-life situation is different, and that forms the foundation of our approach.”
Smith says their customers often express their regret at not consulting their advisers earlier: “The number of times our customers have said, ‘my goodness, I wish I'd spoken to my adviser earlier. I didn't realise Pepper Money was able to help’ is extraordinary.
“This sentiment drives our commitment to fostering conversations about accessible homeownership and financial inclusion for all Kiwis. As an industry, we collectively need to raise consumer awareness about non-bank options.”
Importantly, Smith concludes: “Whenever you have a client that doesn’t tick the main bank boxes or a client that has experienced a significant life event, give it the non-bank test. If Pepper Money can help, we will.”