Danny Belton, Head of Lender Relationships, Legal & General Mortgage Club
The specialist lending market is quickly becoming one of the fastest growing areas in the mortgage industry, as more borrowers struggle to meet the strict and vanilla-like lending criteria of the high street. Although volumes are lower compared to the wider market, specialist mortgage lenders’ gross annual lending has increased by 19% year-on-year since 2009, according to the Intermediary Mortgage Lenders Association (IMLA).1
One reason for this increase is specialist lenders’ ability to deal with more complex mortgage applications, many of which would be rejected by high street banks. This includes applications from customers with complex sources of income or the self-employed, contractors and entrepreneurs, all of whom make up a significant majority of specialist lending cases. Brokers, therefore, need to be aware that as the UK workforce continues to evolve, these types of customer are only going to grow in number. Already, the UK has nearly 5 million self-employed workers who account for nearly 15% of the workforce.2 This trend has been picked up on by lenders, including Precise Mortgages whose flexible approach to the self-employed has started to result in more self-employed and contract workers considering specialist lenders.
Similarly, a small blip in a person’s credit history is often due to easily explainable credit issues, such as a missed phone bill, expired credit card, a change in bank account, or a small one off pay-day loan. Many of these customers are not repeat offenders and often have a good credit history before and after such a blip, yet they will often be turned away by the high street.
As a result of the growth in the specialist lending sector, there is a clear need for brokers to understand specialist lending criteria and how the process differs from traditional lenders. Some brokers have remained cautious of specialist lending, not wanting to deal with complex customers or unfamiliar lenders. However, there are significant opportunities for brokers in specialist lending, as the number of borrowers with adverse credit continues to grow.
Specialist lenders, such as Precise Mortgages, are able to cater for those who fall outside the mainstream lending criteria. With its approach to underwriting and its credit risk management process, Precise Mortgages assesses applications on a case-by-case basis to help customers underserved by high street lenders get the mortgage or loan they want. This approach means Precise Mortgages can use the human touch to take each borrower’s personal situation into account and identify the best products for them.
Even if your customer already has a mortgage with a high street lender, the specialist lending market can still help. For example, bridging and second charge loans can meet the needs of certain customers, yet are only offered through specialist lenders. It’s one of the reasons Legal & General has seized on the opportunity and launched a direct bridging and seconds club route with Precise Mortgages and other lenders with a view to growing this area of the market.
Over the coming years, we hope to see more and more brokers seize the opportunities that specialist lending brings, so that each and every customer can find the right solution for their needs, regardless of their circumstances.