If you don't ask lenders, you don't get

22 Aug 2013

There are many different measures by which the health of the mortgage market can be checked and most of these indicators – such as activity levels and broker confidence – are returning positive results at present.

But what I always consider to be one of the true litmus tests is the willingness of new lenders to join the market and, judging by recent developments, it would appear a number of institutions are poised to join proceedings.

Commentators suggest there are three firms currently applying for regulatory approval to become mortgage lenders and, when added to Magellan Homeloans which launched recently, the market isn't short of new entrants.

These new institutions may not threaten the status quo in terms of volumes, but where they may be able to snare some market share is by offering more of a bespoke service and catering for niches that the larger lenders have shied away from.

We are unlikely ever to see the return of truly heavy sub-prime, but there could well be a number of lenders pricing for risk, playing round the margins of near-prime where individuals satisfy the majority of traditional criteria, but fall foul of some scoring systems. While overall product availability may have improved from the nadir witnessed around 2009, we are still lacking in areas such as higher loan-to-value mortgages and hopefully any new entrants can help plug the gaps.

Genuine lending competition - providing alternatives and multiple choices for borrowers - is perhaps the final piece of the jigsaw in terms of the mortgage market completing its recovery. Over the past year or so, we've witnessed lenders happy to rely on the crutch of Funding for Lending without showing any huge appetite of their own, so some new entrants shaking things up could be just what the doctor ordered.

Factor in the continued strength and adaptability of the building society sector and it's clear to me that some of the bigger banks may not be able to rest on their laurels for too much longer.

There seems to be little doubt that the mortgage market is on an upward curve, but that doesn't mean that we as an industry can sit back and think the job is done. Instead, we must seize the initiative and help drive things forward and always expecting more from the lenders we deal with is part and parcel of that.

No-one is suggesting lenders abandon the sensible principles that have steered them through the tough times, but it may well be the time to start adopting a more flexible and innovative approach.

Bob Hunt

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