Australia-based Pepper Group looking to set up UK mortgage lender

Pepper Group, the parent company of Australian non-bank mortgage lender Pepper Homeloans, is planning to set up a UK lender following its acquisition of third-party servicer Oakwood Global Finance.

The group already operates in Europe across Spain and Ireland in addition to the firm’s home market of Australia where it is involved in lending, asset management and real estate advisory services.

Pepper did not have a presence in the UK until its purchase of Oakwood, for an undisclosed sum, although Pepper Group chief operating officer Fraser Gemmell confirmed it is looking to set up a UK lending arm, once the securitisation market has recovered in this country. Oakwood will be rebranded as Pepper UK and there will be no job cuts.

Following the financial crisis, the issuance of mortgage-backed securities dried up in the UK and most other parts of the world, as investors shied away from bonds linked to property.

This led to most of the UK’s non-bank lenders disappearing as in most cases they were almost entirely reliant on the wholesale markets for funding.

Speaking to Mortgage Strategy, Pepper Group chief operating officer Fraser Gemmell says: “Within our European entities we are very much asset-management focused at the moment, however in each market that we go into, we have aspirations to lend.

We do a lot of research in each market we go into, we understand the macroeconomics and we know that there is a demand for the product we’d like to lend. It’s a question about capital markets and when they can facilitate some sort of securitisation take out – that would be the driver.”

Pepper has not yet applied to the Financial Conduct Authority for UK lending authorisations.

In Australia, Pepper positions itself as a lender for borrowers with adverse credit who “are unable to meet the lending criteria of banks”. It allows borrowers to have an unlimited number of defaults in the 12 months prior to an application and has a specialist product for self-employed borrowers.

Trinity Financial product and communications manager Aaron Strutt says: “There are a few lenders offering adverse-credit mortgages to borrowers with a poor history, but that side of the market is growing so there will always be lenders looking to take advantage of people trying to get onto the property ladder but finding it hard.

“It seems like Pepper has taken inspiration from Magellan Home Loans as the proposition seems very similar.”

Both Pepper and Oakwood were founded by Pepper Group executive chairman Michael Culhane in 2001, with Oakwood originally owning the Pepper Group before it was sold off from the Oakwood fund. London-based Oakwood currently has over £2.5bn in assets under management.