Excess Spread — Can you kick it, royal rumble
- Owen Sanderson
Yaaaas Queen
Molo Finance is the poster child for the challenges faced by UK non-bank lenders over the last couple of years.
Many lenders shrank their origination, as rising rates made writing loans a money-losing proposition for the securitisation-funded community. Deposit-funded banks kept mortgage rates lower for longer and took share; lenders which sold their loans into forward flows had no coupons to clip to keep the lights on, and had to rely on product fees from origination which wasn’t happening.
Anyway, Molo stopped lending early, suspending BTL origination in April 2022; it became impossible to write loans for its forward flow on acceptable terms. A hard stop like this is bad news for a specialist lender, since it lands badly with the broker networks on which many depend. Pull product without warning and it taints the lender’s brand.