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 Building Society in setting up propositions.
However, Fitch Ratings has warned that the aggressive sales targets of these 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 in that market.”
Albers also predicted the market share of approvals of non-conforming lenders would continue to grow, with building societies the ones who felt the pressure.
However, Stuart Jennings, head of RMBS, Europe, Middle East and Africa at Fitch Ratings, believed lenders already in the market had plenty in their armoury to help them compete.
“The lenders who will fail will be the ones who don’t know what they are 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.”
