Goodbye doesn’t have to be forever

17 Feb 2020

Over the past 12 to 18 months, we’ve had a handful of lenders stop originating new business in both the residential and buy-to-let sectors. Some, such as Fleet Mortgages, returned quickly to market and, with new funding lines, appear to have taken the break in their stride.

Others, it is sad to say, look unlikely to return. Few in the marketplace, for example, expect Tesco or Sainsbury’s Bank to begin residential lending again, while the same could be said for Secure Trust Bank and Magellan.

Whether Axis Bank’s recent announcement that it is conducting a strategic review and has therefore stopped all new BTL mortgage origination, is an example of the former or the latter remains to be seen, but we are all in no doubt that competition amongst lenders is rife and this will result in change.

What we mustn’t be quick to do, when such announcements are made, is damn the entire sector. At the start of last year, when two or three lenders announced a suspension of new activity, many were quick to suggest this was the ‘Credit Crunch mark 2’.

 

That’s clearly not the case and neither can we say that the BTL market is somehow in difficulty because one lender has chosen, in what is a very competitive field, to review its current activity.

Gross lending figures from UK Finance for the BTL sector tell a rather different story – with December figures yet to be published the first 11 months of last year totaled £36.5bn and, if as expected, December posts ‘average’ figures, this should take us close to £40bn which is pretty much the same as 2018. Similarly, total gross mortgage lending figures for 2019 was just 1.1 per cent down on 2018, and this does not include the growing amount of product transfer business that was conducted.

It’s a considerable amount of lending and we have large numbers of lenders actively competing for it – take a look at average rates in the BTL space and you’ll see a downward trajectory. Again, the case is the same for residential activity – pricing is keen to say the least.

Individual lenders make individual decisions – the market will have a say in the conclusion that is reached, but it certainly won’t be a uniform picture for all. Far from it.

In the grand scheme of things, there are still tens, if not a hundred, lenders competing for your business and that of your clients, which gives you plenty of options to present and excellent rates to be accessed. It is not nice to see a lender close to new business but let’s hope it can return; even if that’s not the case, the market is incredibly healthy. We should not forget that.

Bob Hunt

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