The non-conforming markets across the globe have undergone a rocky few months. Following the US non-conforming woes, many lenders, including those in the UK, took the decision to re-define their adverse strategies. At the Mortgage Introducer Sub-Prime & Technology Forums, in association with Mortgage Times, the future of the market was debated.
Giving lenders the chance to discuss the past, present and future of the sector, the forums came at perhaps no better time to have a frank and open discussion about the non-conforming mortgage market. Sponsored by db mortgages and supported by Kensington, Goldsmith Williams and GMAC-RFC, the forum, held in Cardiff’s Millennium Stadium, gave brokers the opportunity to look at lenders’ plans for the future and discuss the troubles currently affecting the global market.
‘In intensive care’
Looking across the Atlantic, it is clear that the troubles that have engulfed the market have, to an extent, extended to UK shores, and Bill Dudgeon, managing director at db mortgages, admits that ‘the non-conforming market is in intensive care’. However, he added that he expected the market to recover, albeit with changes to its original form. “The heavy adverse market will have a future, but lenders will be looking more closely for affordability and the borrowers’ ability to pay, as well as establishing greater controls,” Dudgeon warns.
Steve McCarthy, e-commerce integration manager at Kensington Mortgages, adds that the evolution of the non-conforming market has been so rapid over the past decade, with new lenders entering at a fast pace over the previous 12 months that a period of reflection was necessary. He explains: “There is definitely market nervousness but this will change, and over time, correct itself. There has perhaps historically been some ‘creative’ underwriting in this sector, which will need to be looked at.”
However, Dudgeon believed that now was the perfect opportunity to overhaul the current system, making controls and definitions clearer for everyone involved; lenders, brokers and borrowers. He says: “The market terms being used need some form of standardisation. There are so many different categories and I think that the sector needs to take a look at these.”
‘Only a blip’
Paul McGuirke, national head of sales at Mortgage Times Group, does not paint such a gloomy picture of the non-conforming market. He says: “The US market has caused a UK correction that was perhaps needed. The UK’s troubles are only a blip.”
With Mortgage Times soon to launch its non-conforming sourcing system, Vision, McGuirke believes that such technological advancements will only help to increase market confidence. In a time when more UK borrowers are forced to look at the non-conforming market for their mortgage as a result of increasing Bank of England Base Rate rises, council tax and household bill rises, and the continued ‘spend now, save later attitude’ among consumers, McGuirke believes that Vision will be able to deliver a transparent and responsible sourcing system; something he believes is currently lacking in the sector. “Vision will be the sourcing system for the non-conforming sector. Trigold and Mortgage Brain have tried, but we believe that we can do better. We have direct lender integration so that once an application has been submitted the system will check products against a number of lenders on our panel, not just the one lender.”
The importance of face-to-face advice
With technological enhancements continuing to dominate the financial sector, John Wright, data integration manager at GMAC-RFC, urged brokers not to forget the importance of face-to-face advice and promoting business through advertising. He says: “The market is becoming more competitive and organisations, be they lenders or brokers, need to have a market presence and brokers should focus on marketing.”
However, as the market has learned, brokers are sceptical of advertising for fear of breaking the regulator’s rulings on Financial Promotions, which leads back to Dudgeon’s calls for greater simplification.
It seems clear that despite the talk of a credit crunch and continued uncertainty over the US non-conforming market, the problems affecting the UK are ‘just a blip,’ as McGuirke suggested. However, as the MI Sub-Prime & Technology Forum in Cardiff showed, there is perhaps no greater time to fully examine the market and iron out any discrepancies. While non-conforming will bounce back, it is clear that changes will be made to criteria, which may see the end of the heavy adverse sector. The near-prime sector has already seen a number of lenders drop out or make criteria changes, which does not instil market confidence, but should, in the long run, lead to greater control.
