We’ve seen the rise and fall of products such as self-cert and sub-prime and the emergence of strong new categories such as buy-to-let.
When you analyse the issues associated with more contentious products, they have more to do with how those products were sold than they have to do with the fundamentals of the products or market sectors themselves.
Take self-cert for example. Self-cert came into being to make life easier for self-employed borrowers. Unfortunately, misuse, poor advice and greed resulted in the product eventually being ostracised from the market.
The product may have gone, but the self-employed have not and some still find themselves in situations which pose real challenges when it comes to finding a mortgage.
The same principle applies to sub-prime lending. The irresponsible use of sub-prime products has all but eliminated the product category from the market, but the underlying need has not gone away. There are still borrowers with impaired credit records seeking loans and it isn’t reasonable to condemn them all as having been ‘irresponsible‘ and therefore unworthy of being granted further credit.
My point is that eliminating the product doesn’t eliminate the need. If there’s still a valid demand for such products, lenders should be willing to have another look at ways in which products can be developed responsibly, taking into consideration all the lessons learnt from the past, which address the needs of borrowers.
There is a very real danger that our fear of further product failures results in a monotone market with products that only cater for the needs of a restricted type of borrower.
The industry shouldn’t abandon its ability to innovate and be creative. Mortgage product development isn’t simply about tweaking rates and criteria; it’s about finding practical solutions to real issues.
Lenders need to remember their raison d’être and put their product development boffins back to work once again.
Jon Hall is CEO of Saffron Building Society
