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Opportunities in the lending market


Post-downturn, fear of credit risk meant the non-conforming sector took on a grey-toned, conformist hue. As criteria begins to unfurl, niche lending looks set to blossom this year.

Spring is in the air for the specialist lending market. Risk averse lenders have played it safe since the downturn, but once more, the green shoots of innovation are appearing everywhere.

But it was the early launch of the government’s Help to Buy mortgage guarantee scheme in September last year, which really galvanised the specialist mortgage market.

High LTV lending became niche after the credit-crunch. However, any fears the government scheme would be too expensive or complicated to achieve its aims became academic shortly after launch. Even lenders who decided not to join started to compete on 95% LTV lending for the first time in years. Help to Buy 2, as it became known kicked off the first-time buyer market more successfully than anyone could predict.

On the market as a whole, Rob Jupp, CEO, of Brightstar Financial said the difference between 2013 and 2014 specialist lending market is momentum, in a word.

“Last year we were having discussions about how to approach the specialist and non-conforming market. One year later, we don’t quite have a fully functioning market but we have the beginnings of one. It could be another three years to get there.”

But this time around it won’t be a feeding frenzy, but an exciting, innovative market, he said.

Over time, the unregulated Buy to Let market has seen more lender launches than any other niche, feeding strong lending commitment and adviser enthusiasm for the burgeoning sector. Although still below boom-time levels, self-build and refurbishment, large loan buy to lets, Let-to-Buy and HMOs have all notably returned. Also, with the Mortgage Market Review just around the corner, some suggest lenders will compete harder than ever before on unregulated Buy-to-Let business as many expect the market to slow post-April in regulated residential as the market adjusts to new processes.

Broker Ying Tan, managing director of The Buy to Let Business says in 2013 we saw some Buy-to-Let lenders relax minimum income requirements for landlords, which was another step forward. Two lenders – are lending at 85% Loan-to-Value, but for now, Tan doubts any lenders will go beyond 85%.

“However, I’d like to see more lenders up at 85% LTV. As confidence returns and house prices go up, LTV rises tend to follow a period of strong growth,” adds Tan.

Mortgage desks continue to go from strength to strength with advisers grateful for their product and criteria knowledge in trickier niche areas like Adverse, Let-to-Buy, Self-employed or lending into retirement.

But it seems where lenders are increasingly servicing market demand the next task is to make sure the message is getting out to clients that a contractor with one year’s accounts, for example, is no longer barred from homeownership.

Alex Hammond, Kensington’s Head of Marketing Communications said: “There’s anecdotal evidence out there that people still don’t know they can get a mortgage. We really want to figuratively hit people in the face with who our products are for,” said Hammond.

“What brokers can do is review their client database and get out there to talk to contractors, the self-employed and other non-conforming borrowers to let them know we have options for them.”


A review of 2013 and where the biggest opportunities will be in 2014, Mortgage Solutions



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