Lenders are now under pressure to operate within constrictive guidelines that are uncompromising when catering for the needs of today’s first time – and second time – buyer. The fact of the matter is that inflexible products and standardised criteria could constrain growth in the residential mortgage market if the regulator and government do not take action now allow to lenders to be a little more flexible with product design, albeit in a manner which achieves the objectives of regulation.
However, while the CML has revised its lending forecast for 2015 downwards from £220bn to £209bn (pointing out that “several of the government’s fresh housing initiatives will take time to take effect and so do not fundamentally reshape market prospects this year or next”) there is still a silver lining. There are irrefutably some ‘unsung heroes’ within today’s lending arena in the form of a few small building societies who are working hard to accommodate borrowers by adapting their products and criteria to suit those with less conventional circumstances.
Since the introduction of the regulator’s new affordability rules as part of the MMR, almost half of those who planned to buy a property have failed, according to Experian. Private Finance has said that many of these would-be buyers are ‘mortgage misfits’; borrowers with unique circumstances in need of bespoke products and specialist financial guidance.
These borrowers are typically retired or near retirement, self-employed, contract workers, expatriates or first time buyers looking for higher loan to value mortgages. As a result of this innovative, market-driven response from both lenders and brokers, such applicants are now increasingly well catered for by new products from lenders such as Ipswich Building Society, Harpenden Building Society and Market Harborough Building Society. We believe that with an increased understanding of the impact of current guidelines, the regulator might encourage even more lenders to follow suit.
A higher volume of lenders catering for borrowers with more niche requirements will ultimately ensure the market remains innovative and competitive rather than struggling to grow against a persistent tide of regulatory change. More lenders operating in this section of the market is indisputably the best possible outcome for borrowers which is why we sincerely hope the regulator takes action sooner rather than later to provide lenders with the mandate they so urgently need.
