This year has seen a record number of lenders move into the non-conforming sector, with lenders such as edeus and db mortgages also being joined by existing prime lenders, such as Alliance & Leicester and Scarborough BS in setting up propositions.
However, Fitch Ratings has warned the aggressive sales targets of the new entrants would exceed the current capacity of the market.
Suzanne L Albers, director of residential mortgage backed securities (RMBS) at Fitch Ratings, said: “It is surprising there are so many new entrants into the market and every lender has set very aggressive sales targets, which if added together, are far higher than the amount of business available. We could see the new lenders do a lot of business but it’s more likely they will struggle as they have to build up relationships and experience.”
Albers also predicted the market share of approvals of non-conforming lenders would continue to grow, with building societies feeling the pressure.
However, Stuart Jennings, head of RMBS, Europe, Middle East and Africa at Fitch Ratings, believed existing lenders had plenty in their armoury to help them compete. “The lenders who will fail will be the ones who don’t know what they’re doing. Many of the existing players have the servicing models in place to cope with things like arrears and you need experience of the marketplace to succeed.”
Andrew Seymour, chairman of Optoma Broker Solutions, said: “Lenders like Kensington will be aggressive in maintaining their position, but have the experience and the relationships in place to make it work. The new lenders’ flashy marketing campaigns will work for a while but it is uncertain whether they can keep the service and pricing competitive.”
