The return of genuine competition – and subsequently increased volumes – to the lending arena is probably the top item on most mortgage industry stakeholders’ wish lists for 2013, so it was heartening news to see a new lender enter the fray recently.
Investec Professional Mortgages is aimed at individuals such as accountants, lawyers and senior businessmen earning between £50,000 and £75,000 for residential borrowing and in excess of £75,000 for buy-to-let cases. The initial launch is through a handful of appointed representative partners – including Paradigm – and a clutch of directly authorised advisers – including Paradigm.
The new brand may be tailored for a rather specific niche, but it is one where borrowers have struggled of late. Frustrated first-time buyers may garner all the headlines, but they aren’t the only group struggling to obtain the housing finance they need.
It would usually be assumed that professionals in the bracket that Investec are targeting aren’t in need of too much assistance, but individuals in this demographic often have difficulty arranging a mortgage due to the unorthodox nature of their salaries. The box-ticking nature of many underwriting departments these days fails to take into account bonuses, incentives and other methods of remuneration that deviate from a flat monthly salary, so the new lender has been created to service this niche.
It is this identification of a gap in the market that is vital for new lenders to try and replicate. While targeting a niche means potential volumes may not be as high as with a more vanilla residential proposition, it also means there is more chance of success and long-term sustainability if you have a unique selling point; something that differentiates you from the competition.
It is also encouraging to see that the initial roll-out of Investec Professional Mortgages is not only intermediary-only, but with a specially selected group of broker partners. I’ve long talked about the flight to quality and how going forward lenders are more likely to want to associate with a controlled distribution group they know will provide them with the type of business they are seeking and Investec’s approach is further evidence of that. Long term it may cast its net wider, but for the time being it is encouraging to see excellence acknowledged.
Looking ahead, it would be great to see some new entrants challenge the established order in the mainstream residential market, but it is equally important that smaller niches are catered for.
One of the many negative side-effects of the global financial crisis was the number of smaller, specialist lenders who went to the wall and larger financial institutions haven’t always picked up the slack in terms of meeting this demand.
This, coupled with harsher lending criteria and an industry-wide allergy to anything approaching flexibility, means that genuinely suitable borrowing candidates have been left out in the cold over the past few years.
Hopefully the launch of Investec Professional Mortgages is just the tip of the iceberg for 2013 and is followed by further new lending entrants throughout the year.
