01-08-2013

Rise of the small lender

Since the credit crunch in 2008 we have witnessed a massive change to UK mortgage lenders. We mourned the loss of some really innovative lenders and a competitive market place. After some tough years we are now enjoying competition once again in the form of smaller lenders.

After the start of ‘le crunch’ lenders had either disappeared all-together (GMAC, Mortgage Express, Paragon (for a time), Bristol & West…..) or merged with other banks, think HBOSLLOYDSTSBC&GSCOTWIDOWS Group! With the decline in choice no lender wanted to stand out and attract one particular type of business and so lenders have had to really bring their criteria in line with each other (under guidance from the then FSA). With the mortgage market review next year we will see further rules imposed around areas of lending such as interest only. For a period of time I was left wondering if there would be anything left to choose between the various lenders in terms of criteria that would make one lender stand out from the other but thankfully a few lenders have been able to remain innovative when others became almost impossible to deal with.

Now we are in 2013 and with London economists talking of an improving UK with GDP output increases (all be it below 1%) and rises in house prices we are beginning to see what, if the economy were viewed as seasons,  would look like Spring but with the ever present threat of a late snowfall! By referring to snowfall and the threat of winter (still using the metaphors….bear with me) I actually refer to the fact that government incentives such as the Homebuy schemes and funding for lending schemes must be artificially propping up the economy as they are of course encouraging lenders to borrow more, borrow cheaply and therefore lend more. What happens when they stop these schemes, will it all fall in on itself again? Not in my view but food for thought.

Considering all of the above it was perhaps inevitable that new lenders and lenders that previously had a small % of UK lending have risen to compete for the Iron throne. Some of these small lenders now lend up to 90% of their lending through intermediaries and so you can imagine their focus is on how they can work better with their main source of new mortgage business and that can only be a good thing for the intermediary market.

Without mentioning names (as there are too many) we have seen small mainstream lenders offering much needed competition to a market which at times has looked devoid of any competition and so we are back to having real choice for our clients. Some of the small society’s are giving the large banks a run for their money and the large banks are not hitting their lending targets as a result. It is not just mainstream lenders either, commercial lenders rates are now in line with the residential buy to let market, new products that allow bridging with buy to let exits all in one have become sensibly priced, specialist building society’s will now lend to clients with 1 years accounts, to expats and to contract workers, everyone except for the client with no deposit and adverse credit has rightly been catered for and the market is now in a nice position.

I hope that the future continues to see more lenders coming to market, either home grown or foreign, we are not fussy. The more lenders there are the more innovative the market can try to be resulting in more competition which can only be a good thing for the consumer. We expect the remainder of 2013 to be positively busy and look forward to giving more clients the Fox Davidson treatment!