The credit rating agency claimed lenders in the specialist mortgage sector would be vulnerable to a sharp downturn if the housing market deteriorated. It added that if interest rates continued to rise and house prices began to fall, lenders who specialised in non-conforming mortgages could see applications dwindle.
register for the next forum
While the mortgage and housing markets have experienced positive trends, the specialist sector has also grown in prominence since the last recession in the early 1990s, and so may be unproven in an economic downturn. However, comparisons have been drawn with the US, which the UK has repeatedly looked at for guidance on its own non-conforming sector.
S&P’s report said: ‘In turn, this could spell rating pressure for these lenders. The recent (US) non-conforming mortgage experience, while demonstrating clear differences from the UK market, is a salutary reminder that mortgage lending is not risk-free and that the pace of change in credit quality can be rapid.
get the daily news delivered to your inbox
With competition for new mortgage business acute as ever, S&P is concerned that mortgage lending criteria is being relaxed.’
Jonathan Barnett, director at All Mortgage Matters, admitted any downturn could hit the whole market. “Non-conforming lenders are moving into the prime market to ensure that they have sufficient numbers of customers coming through the door. No one will be short sighted enough to specialise in one area – if there is a crash we will all be affected.”
find the latest industry jobs
