Rob Barnard, Pepper Money’s intermediary relationship director, spoke with Mortgage Solutions in light of the lender’s latest Specialist Lending Study, an annual survey that explores the financial complexities of consumers and their attitudes to homeownership.
Having run the study in England for the last few years, Pepper Money wanted to replicate it in a more specific way after launching in the Scotland market earlier this year. The August survey of 1,500 adults showed that with 49% aspiring to buy a home, “homeownership ambition remained strong in Scotland”, Barnard said, “but confidence is a major barrier”.
Homeownership doubt
It found that nearly half of non-homeowners believed they would never be able to own their own home, compounded by the fact that many had non-traditional income that did not fit high street lending models.
Barnard said the findings were “stark” and Pepper Money had a role in giving people in these circumstances more choice through the lender’s “human underwriting and long-term support to the Scottish market”.
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He said it was the right time to expand its lending into the country, which has its own “distinct customer and housing dynamic”.
This was evident in Pepper Money’s study, which pointed to “lower homeownership in Scotland, higher renting and less parental support for first-time buyers than the wider UK picture”.
Barnard and Phil Green, marketing director at Pepper Money, initially went to Scotland to meet with brokers in the country to determine the demand for specialist lending.
“The overwhelming feedback we got was that, if we can carry on doing what we do in England and Wales in Scotland, then we would be very, very welcomed. The key to us launching in Scotland was to launch as much of our proposition into as much of Scotland as we can,” he added.
Pepper Money provides residential and buy-to-let (BTL) loans across the country but does not lend on affordable housing schemes in Scotland, as they differ from those available in England and Wales. Its lending covers mainland Scotland.
Educating through advice and awareness
Barnard said one statistic from the study that was “quite scary” was 49% of non-homeowners believing they would never be able to get onto the property ladder.
He said the levels of people renting in Scotland probably made it hard to save a deposit, particularly as many felt they needed to put down at least 15%, despite Pepper Money lending up to 95%.
To educate people on the options available, Barnard said: “The time for professional advice has never as important as it is today.”
So far, Pepper Money has been well-received in Scotland and was already known by brokers in the country who used the lender to serve their clients in England and Wales. Their main feedback was for Pepper Money to replicate its proposition to the Scottish market.
Barnard said that with 26% of respondents having a missed payment and 18% experiencing defaults, with higher rates among younger people, these credit events needed to be “understood in context rather than treated as the entirety of someone’s financial story”.
Positively, nearly a third of young adults in Scotland aged between 18 and 32 plan to buy a home in the next two years, but more than half believe the application process will be “daunting”.
Barnard said this meant the people most likely to buy a home would also be the ones most in need of mortgage advice, which underpinned the role of a broker and the relationship with lenders.
The study showed that 39% of adults in Scotland were unsure about using a broker, while half of those aged 18-34 did want to use a mortgage broker. Among those who sought advice, 87% had a good experience.
Barnard said it was a matter of “conversation, not credit score” and it was committed to supporting the Scottish market.
