So here we are in a new year and one can’t help but wonder how 2016 might pan out from a mortgage point of view. If 2015 was the year of that larger ‘niche’, the buy-to-let market, then I suspect the next 12 months will see some of the smaller niches come to the fore.
The debate around lending into, and in, retirement certainly thrust itself onto the agenda last year seeing many lenders looking at their product development in this area. This debate began firmly focused on finding a fix for the ‘interest-only time bomb’. However, since the Mortgage Market Review, there has been a wider analysis of how older borrowers secure ongoing finance, and how they prove their affordability to access it.
Again, this is part of a wider financial services change around pension freedoms, access to cash, and within the housing market also, access to equity. One suspects equity release providers have a major role to play in all of this if we are to find a more joined-up solution to servicing ongoing debt in retirement, and ultimately utilising the family home as an asset. I wouldn’t be surprised to see more hybrid products being made available because of this.
In other areas of the mortgage market, lenders are looking at how they can deliver a product range to cater for a specific type of borrower. Certainly, the low-risk, prime, residential 60% loan-to-value (LTV) market is saturated and those lenders who are unable to compete with the mainstream players in this area clearly have to look elsewhere.
This is why a number of building societies have been developing these niche products for borrowers who, post-MMR, may have felt uncatered for. Some more obvious ‘niche’ groups include the self-employed, freelancers, and contractors – but what about the newly-divorced, recently returned expats, first-time landlords and parent/student purchasers? The list goes on. These types of borrowers and their mortgage needs are the hunting ground of the smaller lenders, notably the societies, and we might expect more innovation aimed at these borrowers in the months ahead.
So while there may be a degree of uncertainty about how the mortgage market will pan out this year, it looks likely that this niche borrower approach will grow. In order to do this it will be the preserve of those lenders who have an individual approach to underwriting – real people looking at applications. Which is good news for the potential clients, and the brokers who advise them.
For the most part, intermediary distribution will be the chosen method to secure such business, and when you are a niche, it’s very likely that you’ll be seeking advice in the first place. There’s a clear momentum and the pace of activity is certainly quickening.