Mortgage 2000 is to launch the UK’s first mortgage auction system for brokers through its e-mortgage sourcing system and via its credit portal, financesupermarket.com.
Using a generic application form brokers will be able to submit their clients’ mortgage requirements to a panel of lenders, who within 48 hours will come back to the broker with their bids. Offers will be made using risk-based pricing and brokers will be able to sell products indiv-idually tailored to their clients.
So far 14 lenders have signed up to the panel, including Woolwich, Bristol and West and West Bromwich Building Society. But Mortgage 2000 expects this to have grown to 20 by the time of its anticipated launch in mid-September. Simon Nixon, chief executive at Mortgage 2000, said that the mortgage market is likely to continue moving in this direction. He said: “Profit margins are now so low that lenders will have to offer individual products in order to compete.”
With lenders currently offering a limited range of products there is cross-subsidy between high and low risk borrowers, but by offering risk-based products lenders will be able to offer deals based on the borrower’s individual circumstances.
Borrowers who might not qualify for a specific product may still therefore get a deal, as lenders will be able to cope with a wider spectrum of customers.
Nixon said that this could have a significant impact on the business written by lenders, with more high street lenders entering niche areas.
He said: “Lenders will either have to stop lending and start broking, like Bradford and Bingley, or diversify. High street lenders are missing out on self-certification, 100% and sub-prime business, and the market is getting so competitive that they cannot generate the required level of business from status lending.”
With true sub-prime lending carrying a high risk, most high street lenders will only be able to consider low levels of adverse credit, but other niche lenders may start to feel the pressure.
Nixon said: “Self-cert lenders may start to feel the squeeze since all lenders are likely to move into this area as it carries less risk than sub-prime.”