Clearly the Big Six continue to conduct large levels of lending, but the 2016 figures also point to a market where new specialists and challenger banks are not just making an impact, but garnering some serious activity in a number of areas.
The latest data does show that eight of the top 10 lenders increased the amount of lending they conducted in 2016 from the year previously, but interestingly of those 10 only five increased their market share.
Given that total lending did rise from 2015, we have to surmise that not only was that market share being taken by top 10 competitors but also by the smaller operators.
Indeed, the results reveal there were some pretty significant increases in lending from those new or relatively new to the sector and those who do not necessarily operate in the mainstream residential market.
Precise Mortgages grew its lending by 54%, Metro by 67% and Fleet Mortgages by 150%.
Of those three market players, two (Precise and Fleet) might be best described as specialist lenders – indeed Fleet is only active in buy-to-let.
However, as we can also testify, in the more residential, mainstream space we are also seeing lenders who are looking beyond the vanilla product offering.
Many of the smaller regional building societies for example, are looking at niche borrower requirements – higher loan to value options, greater flexibility in affordability criteria, shared ownership, guarantor options and the like.
A number have focused on helping first-time buyers onto the property ladder.
This has been especially so for achieving required deposits and affordability measures accepted by bigger, mainstream lenders.
What is niche?
It’s been widely acknowledged that a sausage factory approach is not working for more and more borrowers who have varied income levels and changeable working situations.
In such an environment, we should perhaps therefore not be surprised that lenders, who cater for this type of borrower, are continuing to pick up greater levels of business.
In that sense, it appears that we are going to have to broaden our understanding of what niche and specialist actually means.
Previously, we might not have attributed such a label to the mainstream mortgage sector, but that’s no longer possible because in any number of sub-sectors, niche thinking is required and niche products are needed.
For example in areas like new-build or mortgages for the self-employed. And what about lending into later life or mortgages for friends who wish to buy together?
These can’t be said to be vanilla mainstream borrowers.
Criteria is king
So as the segmentation of the market gets ever greater and the requirements of those individuals continue to differ from the traditional, it’s absolutely vital we have a lending community willing not just to look at these applicants, but to specifically shape product offerings for them.
Clearly, the adviser’s role in all of this is crucial. Should we be surprised that as the requirement and need for advice has grown, those specialist/niche lenders have gained in terms of their lending figures?
Advisers are moving towards those lenders that cater for the increasingly complex needs of their client base; those who are fighting on criteria not price; and those who are developing products that fit those needs.
In this market price is important, but I suspect it will be those lenders who are shaping their offerings in areas beyond price who will continue to be the big movers when it comes to securing greater market share.