Each month, Mortgage Solutions and Specialist Lending Solutions sit down with a key intermediary industry figure to discuss strategy, the opportunity for brokers and the mortgage marketplace.
This month, we are sitting down with Rob Barnard (pictured), the intermediary relationship director for Pepper Money, a role he has held for two years.
How did you get into the mortgage industry?
I never planned to go to university and, living in Macclesfield, the two biggest employers at the time were ICI (now Astra Zeneca) and the Cheshire Building Society. I didn’t fancy pill packing, so I started at the Cheshire as a junior filing clerk and made my way from there. Mortgages are all I’ve ever known.
There has been a lot of talk in the market about how the cost-of-living crisis is creating more complex customers and more may need the help of specialist lenders. On the ground, what is your experience?
I think we’ve seen first-hand that brokers who typically say that they “don’t write our type of business” are finding more of their customers are failing the rigid high street credit score approach. That’s not necessarily because of adverse credit, but maybe just because of an increase in unsecured debt or buy now, pay later (BNPL) schemes.
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The latest Pepper Money Specialist Lending Study found that 41% of people with adverse credit have increased their unsecured borrowing in the last 12 months.
According to the study, nearly one in three (30%) people with adverse credit have outstanding debts of more than £5,000, with 10% saying their unsecured borrowing is more than £15,000.
The research also found that 44% of those who have used BNPL borrowing say their amount of debt through these services has increased in the last 12 months.
At Pepper, we really are a great place for customers who fall just off the high street.
Pepper Money was the first specialist lender to launch First Homes products. What has the reception been like for this product, and do you think more specialist lenders should join government schemes like this?
There are many schemes that have tried to plug the gap left by Help to Buy and, in real terms, none have gathered the same momentum on their own. We have stated our commitment to helping hopeful homeowners, with our Affordable Home Ownership proposition, which supports shared ownership and Right to Buy as well as First Homes.
The combination of these schemes is providing valuable support to first-time buyers and we have seen a lot of demand for our proposition.
Pepper Money has been making a number of criteria changes to its second charge proposition in recent months. What has the impact of those changes been, and where does the firm see opportunities in the second charge market?
I think it’s fair to say that we’ve seen more changes in the second charge market in the last six months that we saw in the previous six years – and this is great news. The market is becoming more competitive, and so service and proposition play a key part in driving the sector forward. A second charge is a great solution to so many complex needs, and often speed is important. If the changes we have seen help to both grow the market and also reduce turnaround times, then that can only be a good thing.
Specialist lenders offering product transfers (PTs) has been a hot topic in the past few years as some lenders have struggled to offer these due to the way they are funded. Pepper Money offers a PT; what has the take-up/reception been like and do you think it is becoming more of a differentiator in the specialist lending space?
The take-up has been great, which is good and it shows there’s a need for PTs in the specialist space. But, to me, PTs should be a very last resort as, hopefully, during the time the customer has been with us, their financial situation should improve sufficiently to see them heading back to the high street. Specialist lenders have sometimes been known as credit repair lenders.
A big part of our role is to provide a solution that not only helps people into a new home or to remortgage, but also provides them with a period of stability that opens the door for them to access high street lenders in the future. This is particularly the case for the growing number of near prime customers.
What is the headcount of Pepper Money currently? Are there plans to grow specific teams, and what’s the reasoning behind that?
We currently have a team of over 350 and are committed to offering more competitive rates without compromising service. As a result, we have plans to grow our workforce by circa 10% to support our ambitions to continue raising the bar and redefining a specialist lender’s misconceptions.
What is Pepper Money’s strategy around distribution? Are you looking to build on current relationships, expand to new brokers or a mixture of both?
In first charge, our distribution is now pretty much the whole of the UK broker market, so brokers have the choice to use us directly or, of course, via many of the great packagers that work with us on a regular basis.
It’s great to work with all our distribution partners to spread the Pepper message. The key now is to work even closer with key brokers that already engage with the specialist space and to work with those who don’t write as much specialist business to help them understand that there’s nothing to fear. Using a specialist lender like Pepper is as simple as, if not easier than, using the high street lenders they use on a daily basis.
Looking back at 2024 so far, what are your key takeaways and what are your expectations for the rest of the year?
I think the key message is that we should all be going into 2025 with a much healthier pipeline than when we came into 2024. The specialist market is growing and, as I said before, it’s not all about adverse credit – there are so many customers who fall just off the high street that need the help of lenders like Pepper now. By way of just one example, our Specialist Lending Study found that 7.34 million people say they earn income from more than one job as a result of the cost-of-living crisis. This is up from 5.77 million in the last study.
Finally, what would you want brokers to know about Pepper Money?
We are 100% intermediated, so without brokers, we have no business. With rates not too far away from the high street, clear and transparent criteria, and ease of use, we believe we’re the perfect home for your just-off-the-high-street cases, as well as those with adverse credit or other complexities. We are well-known and well-regarded for great service, certainty, and reliability. So, when you next get a credit score fail and the high street says no, give Pepper a go – because through conversation, not credit score, we’ll turn those blips into dips.
