The reason being that over the last 12 months or so the number of new lenders coming to market far outweighs anything we saw in the six or so years prior. Indeed, were you to go back to the Credit Crunch period you might have anticipated no new lenders coming to market for the best part of a generation.
Thankfully, this has not been the case and increasingly we are seeing new lenders setting up propositions in order to make their mark, or (in a few notable cases) the remnants of existing lenders bouncing back into the fray. This of course is noteworthy for any number of reasons, perhaps principally because a competitive mortgage market is absolutely vital if we’re going to have a stable housing market which offers finance to those who want and need it.
However, there is something of a caveat with the array of new lenders who have either come to market already, are on the verge of doing so, or are rumoured to be hatching plans. The significant point to be aware of is that, almost without exception, not one of these lenders are (or will be) active in the mainstream marketplace and by that I mean they are highly unlikely to be competing with the likes of the Big Six in terms of their traditional ultra-prime, low LTV, low-priced hunting ground.
It will probably surprise no-one to hear that competing in this space when you are dealing with huge institutions who have access to the lowest-priced funds around is nigh on impossible. How do you compete for example with a sub-1%, two year fixed rate mortgage at 60% LTV? The answer is you don’t unless you have access to the same type of funding that, for example, HSBC does.
And the other thing to point out here is that it’s not really such a bad thing that the new lenders are not looking to make their moves in this type of already congested product space. There is a lot of competition here already, not just from the bigger banks, etc, who take home 70% of all mortgage business anyway, but also pretty much the whole of the building society sector who are also very keen to take a slice of this type of business where they can.
So, while this mainstream market isn’t benefiting from new lenders, who is? Well, quite simply, it’s the specialist lending market on which the ‘newbies’ are pinning their hopes. Now ‘specialist’ can mean many things to many people – specialist is buy-to-let, specialist is mortgages for the self-employed, specialist is increasingly mortgages for the older borrower; it’s expat mortgages, mortgages for divorcees, mortgages for those who are credit impaired, mortgages for those who have multiple income streams, the list goes on.
What it isn’t is the traditional, mainstream borrower that the bigger operators want – the new lenders can’t compete here. So what’s happened is they are looking for the niches, they are looking for what has come to be described as the ‘underserved’ – those borrowers who increasingly post-Credit Crunch couldn’t find a mortgage home, or since the introduction of the Mortgage Market Review (MMR) have been overlooked because of the tighter affordability requirements it ushered in.
In effect, we have seen a renaissance in the specialist lending sector and ultimately a light at the end of the tunnel for those who might be described as specialist borrowers. Therefore in buy-to-let we’ve had the introduction of Fleet, Foundation, Axis, and others; and in the ‘niche’ lending element we’ve had New Street, Pepper, Bluestone with the likes of Belmont Green and The Mortgage Lender to follow. Add into this the more established players like Precise, Aldermore, Shawbrook, Kensington, and the like, and you can see a burgeoning and far more competitive marketplace.
So, why is this important to agents? Well in the last eight years there will be clients you know who have simply been unable to move or purchase because they are classed as having ‘specialist lending needs’ of which the majority of mainstream lenders were (and are) simply unwilling to look at. Even though, on most scales, they could afford the mortgage – indeed were probably already paying more in rent in some cases – they couldn’t get the finance. For them, up until very recently, the quest to move or simply get on the ladder stopped there.
Now, however, this doesn’t have to be the case and there are clearly a growing number of lenders who are completely focused on this type of borrower and have the systems, products and pricing to be able to tailor a proposition to them. Therefore, agents may well be able to secure the business of those who were previously ostracised.
After so many years when that was the way of the mortgage world it is nice to see a growing number of mortgage lenders catering for all different types of borrowers – even those who may have had some difficulties in the past but are now back on an even keel. Again, immediately post-Credit Crunch could we have ever envisaged this? It makes the future for many potential borrowers a lot brighter and hopefully this opens up the housing market in a way few back then thought possible.
