The study, by Dominion Bond Rating Services (DBRS), entitled ‘UK Mortgage Lenders: A Turning Point in the Cycle?’ indicated that small lenders could see their margins stretched if they looked at expanding their offerings to increase their propositions. DBRS questioned the ability by lenders to maintain their asset quality if they looked at luring first-time buyers into the market on high income multiple, high loan-to-value (LTV) products.
Julia Peach, senior vice president at DBRS, said: “Higher multiple and higher LTV lending is the beginning of an ongoing trend.
For the smallest building societies and lenders, we have some concerns as to their ability to maintain asset quality if they lure the less creditworthy first-time buyer into the market.”
She added: “Unlike larger institutions with the benefit of both business and geographical diversification, smaller lenders have little cushion in the event of a sustained period of rising rates or unemployment levels.”
Alex Hammond, PR manager at Kensington, said: “Experienced lenders have made it their job to build robust, sustainable lending models for different borrowers, in different markets, at different points in the economic cycle. As long as they continue to take a responsible lending stance, they will continue to maintain asset quality.”
