Who is boosting industry growth speed?
By Jonathan Sealey, CEO
Jonathan Sealey, CEO of Hope Capital, examines the strengths of the mortgage lending sector amid recent economic volatility
Despite recent market, economic and political changes and conditions, specialist mortgage lending has grown 19% every year since 2009. In fact, in 2016 it reached £17bn and the market has showed no signs of slowing down. This comes as no surprise as the number of borrowers in the UK who fall outside mainstream lenders’ criteria continues to grow. Specialist lenders are filling the gap by serving markets that have had less attention from mainstream lenders due to tougher regulation that was introduced in the wake of the crisis.
A position of strength
This reduced mainstream lender appetite for non-standard loans has ultimately allowed specialist lenders to fill the gap in the market, and has been supported by the rising influence of mortgage brokers. The rise in intermediated lending is giving new brands the opportunity to compete with established players, as they are able to scan the whole market to find the best loan for the client, taking into account suitability, price and security.
However, according to the Intermediary Mortgage Lenders Association, there is “substantial” unmet demand for specialist lending. Although the range of borrowers who qualify for a mainstream mortgage will remain restricted, the specialist market thrives on product innovation. It also offers a flexible approach, as well as criteria processes and strong underwriting standards. Long may it continue.
Back in April this year the ASTL sentiment survey revealed that 45% of respondents were confident about the future prospects of the UK economy, compared with just 35% in November 2016. This shows how the market is still experiencing strong growth in terms of enquiries and completions. Figures on the size of the bridging market also show no signs of a slowdown – instead they are gathering pace.
Bridging finance valuations
Therefore, in what is already a relatively crowded marketplace, more lenders entering the market will look at niche areas such as development and short-term secured business loans. However, conveyancing will remain a key issue going forward. In reality, a significant proportion of bridging deals are held up by conveyancing solicitors who are largely unfamiliar with the turnaround times that are required, delaying completion as a result.
The bridging market is a fast-paced one, where valuers have to perform in line with lenders’ expectations while carrying out a transaction, typically in a limited timeframe. In order to provide a robust valuation, due diligence must be carried out and there must be enough time put aside to inspect the property. A lot of thought and attention is needed to highlight any property-specific risks or errors that a lender has not identified. This will help to protect the valuer as well as the lender.
Specialist lenders like Hope Capital are well-placed to deal with future economic volatility as our manual underwriting approach allows us to take borrowers’ circumstances into account, giving us greater flexibility. This is working in the specialist lending sector’s favour considering mortgages are highly tailored products and the number of borrowers with non-standard needs is increasing.