Firing line  

Covid-19 has created opportunities for specialist lenders

“So we walked a very tight rope between ensuring we were prudent from a liquidity perspective, but making sure at the same time we had a good range out there for people to make good use of.”

Specialist mortgage lenders raise funding through the wholesale and capital markets, whereas large banks have access to cheaper funding available through the Bank of England.

In April and May 2020, during the peak of the first wave of the pandemic, the markets were broadly closed, but by late June confidence started returning back to the market.

As a result, Pepper Money completed two securitisations worth a total of £629m in July and September.

Having done that, Pepper Money moved back into the market and was able to materially increase its volumes from September onwards.

Morey says despite the challenges of last year, the specialist lending market was never close to collapsing because of lessons learnt following the financial crisis.

He cites the improved quality in underwriting and greater focus on affordability, which has been embedded into the market over the past 10 years, as a result of greater regulatory oversight.

These improvements, according to Morey, placed specialist lenders in a much better place to deal with the fallout from the Covid-19 crisis.

As Morey looks to the rest of the year, he says that Pepper Money will be looking to enter some market niches that have been exited by lenders. Another focus will be doing more in the buy-to-let market.

Morey says: “I have been so humbled and impressed by my colleagues and by the manner we have gotten through this.

“The opportunity for us as a lender with the appetite we have is great and I think our brokers are really tuned to us.” 

Morey came to the UK from South Africa in late 1999 and joined an investment company, focused on acquiring and selling specialist lenders.

After leaving that organisation he joined a business venture that was to become Pepper Money.

Coming out of the last financial crisis, he worked with three other individuals to build a loan servicing business called Oakwood Global Finance, which he says gave him a deeper insight into the specialist lending sector.

The company was eventually bought by Pepper Group in 2013, which is majority owned by private equity business KKR.

Ima Jackson-Obot is deputy features editor of FTAdviser