By Matthew Tooth, chief commercial officer, LendInvest
The growth of the specialist has been impossible to ignore over the past couple of years, but recent research by the Intermediary Mortgage Lenders Association (Imla) has made clear the increasing role of specialism in the mortgage market.
Imla found that lending by specialists had grown by an average of 19 per cent each year from 2009 to 2016, with a total of almost £17bn lent last year. That’s enormous growth from a sector that was particularly badly dented by the effects of the financial crisis.
The trade body was clear to point out that there was still plenty more room for growth, though. Even with these enormous yearly increases in lending by specialists, the market share of these lenders remains modest. According to Imla, it has grown from 3.5 per cent in 2009 to 6.8 per cent in 2016, and that still lags significantly below the levels seen before the onset of the financial crisis.
There are plenty of reasons to expect that growth to continue.
Every time the market goes through some sort of fundamental change — and the portfolio landlord rules are just the latest in a succession of significant changes we have all had to adjust to — it presents an opportunity for a specialist lender, an opening for a firm that isn’t bound by creaking old tech or the baggage of the credit crunch to do something different and innovative.
Add to that the changing demographics and the number of borrowers who will need to turn to a specialist rather than a high-street bank will only go up.
Just look at the rocketing numbers opting to go self-employed: analysis by Direct Line for Business found that over the past decade the number of self-employed workers had jumped from 3.8 million to 4.7 million, while in the past year alone 174,000 have elected to work for themselves. The mainstream lenders aren’t always the most helpful for self-employed borrowers, leaving plenty of room for specialists to step in and serve this area of the market, which is just what they have done.
And Imla was right to note the strong position today’s specialist lenders find themselves in when it comes to weathering future economic turbulence and downturns. It is a much more stable, responsible section of the market than it may have been in decades past, meaning that, if and when future troubles present themselves, specialist lenders will be far better placed to deal with them than was previously the case.
You won’t be surprised to hear that I believe the growing confidence of the specialist sector is a good thing. There are huge numbers of borrowers who do not fall into the vanilla criteria of the mainstream lenders, but they still need access to finance and, if we are to keep the market fluid, those borrowers need to have somewhere to turn.
But that growth also presents a challenge for brokers, and it’s a challenge that lenders need to be aware of. Keeping on top of the different product details and criteria of mainstream lenders is difficult enough, let alone the varying terms employed by lenders operating in more specialised areas. There is far more to providing quality mortgage advice than simply firing up a sourcing system and performing a quick search.
So as the specialist market grows, it is up to us lenders to do more to help brokers keep up to speed on our ever evolving product ranges, and understand how those products can help, with specific examples of exactly what we will — and won’t — be able to lend on.
It’s not enough to simply send brokers the odd email or promotional pack. Specialist lenders need to take the same disruptive approach that they adopt with their product design and bring that to how they interact with and help intermediaries.
Most borrowers turn to an intermediary to help them with their mortgage, and that’s the way it should be. So lenders must not allow themselves to become complacent and simply expect brokers to be familiar with the minutiae of our criteria alone. We need to go much further to help advisers deliver the most comprehensive advice.
