From Niche to Necessary: Why Specialist Lending is the New Normal

Once seen as a last resort for borrowers, specialist lending is now stepping confidently into the mainstream. According to Pepper Money’s latest Specialist Lending Study, 37% of borrowers plan to use a specialist lender for their next home purchase.* That’s more than a third of the population, hardly a hidden secret anymore. So why does the perception persist?

Specialist lending has evolved significantly. It’s no longer just about adverse credit or higher-risk cases. It’s about flexibility, human underwriting and tailored solutions that reflect the way people really live and work today. Specialist lenders offer a more personalised, pragmatic approach for a diverse range of borrowers. 

A strong start to 2025

The specialist lending market has seen remarkable growth in recent years, driven by a perfect storm of economic shifts, evolving borrower profiles and tighter high street lending criteria. Traditional lenders have become much more cautious in the wake of economic uncertainty, inflation, and interest rate volatility, leaving many borrowers, particularly those that fit outside the mould, struggling to access funding through the more conventional routes. 
As a result, during the first five months of 2025, Pepper Money has seen a year-on-year uplift across the board in Decisions in Principle (DIPs), full mortgage applications and completions via the Paradigm Mortgage network. Indeed, the number of DIPs rose by more than 50% on an annual basis, signalling growing demand for specialist lending solutions. 
Despite this surge, Pepper Money prides itself on its exceptional customer service and a human led underwriting approach. A common misconception is that providing a specialised service takes longer than high street options, yet Pepper Money is successfully converting more business driven by the Paradigm mortgage network, having seen a 13% year-on-year increase in DIP to completion conversions. 
 

No longer an option of last resort

In 2025, specialist lenders are no longer the last chance saloon for borrowers needing a more nuanced approach to their finances. Rather, they play a vital role in the financial ecosystem, supporting modern borrowers whose circumstances don’t fit neatly into the boxes prescribed by the high street.
Borrowers with stable financial histories are now actively choosing specialist lending solutions, thanks to growing awareness of how they can meet their needs. In fact, 79% of mortgage offers Pepper Money issued via Paradigm came from applicants with no County Court Judgement (CCJ) and 50% did not have a CCJ or a default. 
These shifts in borrower profiles challenge the view that Pepper Money is only for those with adverse credit. Specialist lending solutions are also a lifeline for those with variable or irregular streams of income, such as self-employed workers and those in non-traditional professions. While 72% of self-employed workers think that their employment status makes it more difficult to get a mortgage**, Pepper Money’s manual underwriting process means mortgage applications are approached with a more holistic view of an applicant’s financial situation and can offer tailored products with greater flexibility when it’s needed most. 
 

Flexibility when it matters

There’s a clear appetite to get onto the property ladder, as nearly 7 in 10 (69%) of respondents to our 2024 Specialist Lending Study who did not already own their own home aspire to in the future***. Flexibility for these first-time borrowers is key. That’s where specialist lenders stand out amongst their competitors on the high street; offering such a wide selection of products designed to meet variable needs. 
Specialist lenders like Pepper Money play a key role in offering a broad range of products from Shared Ownership, Right to Buy and Debt Management Plans. Brokers have a suite of adaptable financial solutions to help borrowers from all backgrounds. While numbers are modest, Pepper Money is proud to have supported a 133% year-on-year increase in Right-to-Buy completions via Paradigm, and we hope to see this number rise in future as awareness of the scheme grows amongst eligible tenants.
At Pepper Money, we take an inclusive approach to lending, and these changes to our criteria attest to this. Enhancing our proposition to include 90% LTV products as well as income from UK visa holders ensures that hard-working individuals, with smaller deposits or on eligible visas, aren’t excluded from homeownership.
 

Specialists in growth

The specialist lending market is one that sees huge growth potential. But this is not just down to borrower demand, the sector is evolving to meet that need with innovation and creativity, combined with human input which sets the market apart.
As the specialist lending market leader****, at Pepper Money we’re proud to say yes to more: yes to more applicants with unusual financial circumstances, yes to more applicants with irregular forms of income and yes to more applicants who don’t fit the requirements of high street lenders. Pepper Money is a lender that sees the full picture.  


 

Sources

* 26% of respondents are planning to mortgage with a specialist lender and 11% are planning to remortgage with a specialist lender, page 23 https://www.pepper.money/broker/resources/specialist-lending-study/ 
** 72% of self-employed people think that self-employment makes it more difficult to get a mortgage, page 5, http://pepper.money/broker/resources/specialist-lending-study/
*** Nearly seven in 10 (69%) people who don’t currently own their own home say that they would like to in the future page 5, http://pepper.money/broker/resources/specialist-lending-study/
**** Smart Money People, Mortgage Lender Benchmark Thirteenth Edition: H2 2024, Smart Money People Mortgage Lender Benchmark H2 2024 Full report.pdf

 

About Pepper Money

Pepper Money is the brand name used globally by all Pepper Group companies to market consumer finance products. In the UK, Pepper Money offers a full range of specialist residential, buy to let and second charge mortgage products to customers whose requirements may be underserved by traditional high street banks and building societies.  
A market leader in residential, buy to let and second charge mortgages, Pepper Money uses financial inclusion as its guiding principle, providing affordable home loans to a wide group of customers, including those who have experienced credit problems, are self-employed, work as contractors, earn variable income or simply because their circumstances require a more considered approach.