IMLA reveals specialist mortgage lenders’ market is on the rise

According to the Intermediary Mortgage Lenders Association (IMLA), specialist lenders’ gross annual lending has increased by 19% year-on-year. This makes specialist lending one of the fastest growing sectors in the mortgage industry. 

A significant factor in this growth is the number of borrowers who now require affordable solutions and the ability to deal with more complex applications. For example, those rejected by high street banks using traditional credit scoring methods.

Indeed with a changing economy, and 15% of the total UK workforce now consisting of the self-employed, entrepreneurs and contractors, this vital and growing sector is only going to result in more and more customers with multifaceted sources of income. But, even traditional customers with 9-5 jobs are turning to the specialist lending market for products such as bringing loans and second charge mortgages.

Bad credit scores

Today, the number of consumers with County Court Judgements is on the increase, with 1,138,058 judgements registered in England and Wales in 2017. And these people are also turning to specialist lenders. However, a significant portion of the market is also devoted to customers with easily explained issues that have led to an adverse credit rating and a frustrating ‘computer says no’ response.

All too often, these individuals are financially sound and more than capable of meeting their mortgage repayment requirements, but traditional automatic credit scoring systems are unable to cope with such application requests. However, by assessing applications on a case by case basis, specialist lenders can take such circumstances into account and find the most suitable product available.

Commenting on the IMLA’s findings, Danny Belton of Legal General said: “The audience for specialist lenders is potentially huge – and growing, and lenders and brokers within this market can provide some real benefits.”

Specialist lenders first came to prominence in the 1980s following financial deregulation enacted by the Thatcher government. And, according to the IMLA, the outlook for this sector is positive, with demand from ‘non-standard’ borrowers likely to remain buoyant.

Despite this, some brokers have remained cautious of specialist lending, mainly due to not wanting to deal with complex customers.

Earlier this month it was revealed that completed remortgages are up 7.1% year-on-year and there were 8.1% more new first-time buyer mortgages compared to the same month a year earlier.

However, Steve Seal, director of sales and marketing at Bluestone Mortgages, said: “Whilst it’s good to see continued first-time buyer activity, these results do not reflect the growing pool of borrowers who struggle to access funding.

“Contractors, entrepreneurs or self-employed workers with complex financial backgrounds usually struggle to meet the vanilla criteria of high-street lenders – even if they have a reliable history of repayments.

“The specialist lending market has a significant role to play in closing this funding gap; providing a service that understands an individual’s circumstances and supporting borrowers in their homeownership aspirations.”

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