Helping Customers Succeed in a Challenging Environment


Laurence Morey, CEO of Pepper Money

There is no doubt that we live in a very difficult economic environment. The ONS said UK inflation rose to 9.1% in the 12 months to May, the fastest rise in 40 years, and the Bank of England warned that the inflation could reach 11% this year.

As a specialist lender, it is always important that we have a thorough understanding of our clients’ needs, but in this environment, in particular, this requirement is even more pronounced.

We know that with rising costs, the monthly commitment to pay off short-term debt such as credit cards, store cards and overdrafts can stifle many families’ ability to meet their monthly expenses, especially when the cost of that credit also increases. . We also know that, under the right circumstances, consolidating expensive short-term credit into a longer-term loan at a lower rate can help families better control and normalize their finances, as they repay that credit at longer term. term.

At Pepper Money, our average overall rate on a second mortgage is 6.2%, which compares favorably to other forms of lending such as unsecured loans and credit cards. In today’s environment, this ability to refinance at a lower rate could provide millions of borrowers with the breathing space they need to manage their monthly finances and get through this tough time.

Debt consolidation is not the right path for everyone and there is a risk that, for vulnerable clients, it will make their debt worse. This is a risk we are all too aware of and for which we have rigorous processes and procedures to mitigate. Indicators of this type of client are habitual refinancing on increasingly large balances and we can identify circumstances where debt consolidation does not always benefit the client. Our role is to deliver positive societal outcomes and we are always keen to do this in our loans.

We regularly undertake in-depth analysis of all our loans to ensure that we are achieving this goal, and data shows that the debt consolidation loans we provide are for ordinary people with good credit scores and good incomes. For example, the average median salary of our second load clients is £53.9,000. This compares to an average ONS UK median salary of £31.3,000, which puts our borrowers just outside the top 20% earners in the UK. Often these people have accumulated large balances over a long period of time and they take proactive steps to normalize their situation. By doing so, they often improve their credit profile, and we see an increase in average credit scores after taking out their consolidation loan. They also do this while maintaining a comfortable cushion of equity in their homes. The average LTV on our second charge loans is just under 70%.

We are at a point in the economic cycle that is defined by uncertainty, but I’m happy to say that within that we have a strong position at Pepper Money that allows us to look beyond that uncertainty. and to provide loans that can help customers continue to be successful lifelong. We are well funded and have recently completed a successful securitization, demonstrating the strength of the assets we create. This means that we continue to develop and expand our proposition to help customers underserved by traditional banks and building societies. We use financial inclusion as a guiding principle, offering affordable home loans to a wide group of customers, including those who have experienced credit problems, are self-employed, work as entrepreneurs, earn variable income or simply because their situation requires a more considered approach.

Part of our success, I believe, is that we take a human approach to delivering our offering to other humans. We understand what our clients – intermediaries and borrowers – expect from a lender and we have worked meticulously over several years to put the building blocks in place to achieve this. Our investment in technology, combined with this human approach, has helped us consistently deliver industry-leading levels of service.

Interest rates are rising rapidly these days and lenders must, of course, frequently reprice their products. In this environment, good service can mean the difference between a customer getting the rate they were originally offered or missing out. It can mean the difference between a positive customer outcome and a disappointment. And so, we will continue to strive to be the best we can be in this area. We also remain committed to giving as much notice as possible when we need to reprice our products.

Ultimately, I believe Pepper Money is capable of delivering positive societal outcomes and making things better for people and we can only truly be successful if we do. This needs to be measured, not just in the loans we make and the results we deliver to our clients, but in our broader societal contribution.

We have developed a broad and involved environmental, social and governance (ESG) program that we call The Pepper Way Forward. This informs the principles on which we build our business and everything we do. This means putting inclusivity, sustainability and responsibility at the heart of our behavior. We are committed to minimizing our environmental impact – by reducing our carbon footprint, traveling less and supporting carbon offset programs to plant more trees and increase bee populations. We are actively developing new products to encourage the construction of greener homes.

For example, we offer our customers a free energy efficiency survey, an EPC certificate and a tailor-made action plan. If the action plan requires expenses to complete the work, we could offer clients a second mortgage which could help finance the improvements. For clients undertaking the proposed works, a second EPC may also be requested to validate the improvements. And we recently rolled out this proposition to our Buy to Let owner-occupier customers as well as landlords.

We live in a difficult economic environment. At Pepper Money, we don’t use this as an excuse to hide. Instead, we embrace the opportunity to rise to the challenge, to use our funding, resources and people to help make a positive contribution to those we work with. By doing this, hopefully, we can help make the environment a little less difficult for others.

Laurence Morey, CEO of Pepper Money

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