I was intrigued to hear on the radio that ‘Eye-Spy (with my little eye)’ is still the most popular way of keeping children amused during long car journeys, despite the recent innovations in portable entertainment. This got me thinking about other childhood games and technology developments. One game better suited to birthday parties was ‘Follow the leader’. This received its own technical makeover two years ago, in the form of the disco dancing machine found in any amusement arcade – a kind of ‘Simple-Simon meets feet’.
But which is the best approach to business development: leading or following? With 16 new lending entrants signed off by the CML in the last eighteen months, are we right to question whether they will emerge as leaders, bringing new ideas to the industry or will they just regurgitate old ideas time and time again?
One of our most popular products at The Mortgage Times Group is Northern Rock’s ‘Together’ range. For the minority who are unfamiliar with this product, it combines secured and unsecured borrowing up to 125 per cent loan-to-value, significantly contributing 28.7 per cent of Northern Rock’s £24 billion per annum. Following its launch, brokers embraced the opportunity to target first-time buyers predominantly.
Consequently, Northern Rock became a leader quicker than Jack on the ‘Lost’ island.
Brokers expected other lenders to follow suit, but they waited and waited…and waited in vain. Admittedly, Coventry’s MOREgage range operates on a similar basis yet fails to write anywhere near the same level of business. Surely if Northern Rock had got its sums wrong the ‘ Together Range’ would have been withdrawn years ago, shortly after it was launched in 1999? Instead I just marvel at the amount of income it has generated.
To become a ‘leader’ the lenders’ risk manager must be bold but results can be startling. London Scottish and Blemain had the non-standard property sector sewn-up for years, successfully managing to both hold their positions in an uncompetitive manner and generate significant revenue. Fair play to them though because they were brave.
My real disappointment was the length of time these lenders were allowed to run without any significant competition. Certainly, we’ve seen lenders dip into untargeted property types – only this week Cheshire Building Society announced it will now lend on private flats to nine storeys – but I want to see someone really having a go at them. I would like to know whatever happened to the scrap and the desire to win?
While penning this, I thought of Kensington Mortgages, a renowned pioneer of the UK non-conforming market. Taking into consideration all the entrants into this market since, despite not being the sharpest on rate, Kensington has been able to maintain a top three position for most intermediaries. Similarly, which lenders were brave enough to challenge TMB’s lead following the launch of their House2House?
Despite a turbulent few years (by their own standards), it is only in the last six months that its market share has been attacked by Platform and Rooftop Mortgages, by which time it had already steadied its ship.
So I conclude, despite the advantages of being second and having a dry run to spot the flaws in the original product, copying ‘true’ ideas is not as easy as you may have first thought. If you have a risk manager willing to adopt a pragmatic approach by nurturing business growth and treading into the unknown, they can probably adjust their thinking to modify the original ideas and stay ahead of the game. Those who are initially cautious are likely to remain so when the competition hots up. Paired with a forward-thinking product developer, the new providers might just make an impact and take us into new areas. Let’s hope so anyway.
Mainstream
Cheltenham & Gloucester now charge a valuation fee on purchase business. Nationwide offers the option of increased completion fees to reduce the initial payrate on its two-year tracker and fixed rates. Principality’s redefined lending criterion for foreign nationals and diplomats seems fairly standard and allows borrowing to 75 per cent LTV. Cheshire Building Society now considers flats over commercial premises. Mortgage Express’s new 5.99 per cent lifetime mortgage, one of the most competitive in the market, is probably the best option via the ‘packaged’ route.
Buy-to-let
Mortgage Trust has clarified its stance for their competitive MT Select Range in ASBO areas and properties with HMOs. It is insisting the deposit is funded from the applicant’s own funds rather than a builder incentive.
GMAC-RFC now allows 89 per cent LTV purchases on its two-year fixed rates while reducing the completion fee on its three-year alternative. Bristol & West no longer requires proof of the £15k minimum earned income, which should speed processing. Cheshire Building Society now allows students and DSS tenants.
Self-certification
The Mortgage Works has increased its standard two-year fixed rate by 0.09 per cent to 5.24 per cent. It still has a 4.69 per cent option with 1.5 per cent completion fee. The popular self-cert secured loan provider Nemo now offers a promising three-year fixed rate alternative and also a 100 per cent self-cert.
Adverse
Rooftop Mortgage’s right-to-buy range now includes fixed rates. Interestingly it has dropped its medium adverse band, presumably due to low demand. Scarborough Building Society, a new entrant this year, now offers the option to revert to a prime rate after three years – a sign of things to come.
Richard Stokes is head of product development at The Mortgage Times Group
