As more borrowers have financial backgrounds and circumstances outside the vanilla mould, the importance of specialist lending and the opportunities available for brokers continues to grow.
Steve Seal, (pictured) director of sales and marketing, Bluestone Mortgages
Anyone who follows the news is aware that political and economic uncertainty continues to grip the UK. Despite this, the mortgage market remains strong – particularly specialist lending. As more borrowers have financial backgrounds and circumstances outside the vanilla mould, the importance of specialist lending and the opportunities available for brokers continues to grow.
In our latest specialist lending tracker, over a third of mortgage brokers (34%) referred more than a quarter of clients to a specialist lender over the last 12 months. Broken down, nearly a quarter (24%) referred 26% to 50% of their clients. Interestingly, one in 10 referred over half of their clients. In short, it’s clear that brokers are regularly using specialist lenders and are comfortable doing so.
As customer types change though, it will be interesting to see how these referrals evolve over time. Growing pools of consumers with non-traditional circumstances are already presenting big opportunities and promising substantial business growth for brokers working within the specialist market. According to the Intermediary Mortgage Lenders Association (IMLA), the specialist lending market was worth £17bn in 2017 – having more than tripled in under 10 years. Of this, residential lending was approximately £3bn.
The truth is that the lending criteria of mainstream lenders is unable to cater for borrowers with complex financial or personal circumstances, so it’s no wonder that brokers are referring a fair share of their clients to specialist lenders. Over half of the brokers (53%) that participated in our survey cited this as one of the primary reasons they refer clients to a specialist lender.
If we take self-employed workers specifically, their numbers have increased from 3.3 million in 2001 to 4.8 million in 2017 - and this figure is expected to rise even further. Within our survey, brokers citied irregular or multiple income streams as among the most common reasons to refer a client to a specialist lender. Furthermore, when asked about customer profiles, half of the brokers said that the typical employment status of a specialist client was self-employed.
Consumers with “riskier” circumstances – such as those with CCJs, bankruptcies or IVAs – will typically be met with reluctance from high-street lenders. It’s possibly why only 23% of brokers would refer a client with a CCJ, bankruptcy or IVA to a specialist lender – these borrowers may not be approaching brokers because they feel it’s impossible to secure lending. Whilst mainstream lenders are unable to unlock business opportunities within the specialist space, specialist lenders and brokers can better support this segment of the market.
As the number of complex borrowers increases, brokers can tap into the growing pools of customers that need advice and support. With the industry working to raise the confidence of more brokers in the specialist space, more first-time buyers, remortgagers, homemovers and others will be able to access the lending they need.
