The non-conforming lender, which launched in August last year, said the new rates set to launch next week will be a dramatic drop from the current 8.52% pay rate.
Matt Gilmour, managing director of Magellan Homeloans (pictured) said: “We’ve listened to the market and are aware that the changes to pricing and the impact on affordability and accessibility this will have. We have also listened to the intermediary community and have always said as soon as we secured cheaper funding we would pass on that benefit.”
The lender plans to look at its back book and in time, after examining the compliance implications, for example with the Key Facts Illustration, intends to pass on the cheaper costs of funding to existing and new clients.
“We think it’s the right thing to do. It’s a moral stance rather than a decision taken from a business angle,” added Gilmour.
“In this post-crisis environment we hope this will be a precedent for us to do this the right way. There’s a lot of scrutiny from the regulator and all of our stakeholders and we hope to create a blueprint for the industry,” he said.
Speaking at the Mortgage Advice Bureau today in Leicester, Brightstar chief executive Rob Jupp who trailed the Magellan changes, said the industry needs to “come off the fence” and open up the public debate about mortgages for those with a non-conforming credit history.
He said, “We need to be able to tackle the large number of people not able to get a mortgage or trapped in their existing borrowing arrangements. I am not advocating a return to the ‘anything goes’ culture that developed during the last boom. However, since the credit crunch, we have all become a bit brain washed with the mantra that everything to do with non-conforming mortgages was bad, and worse that no one could talk about it in anything but a negative manner without being labelled as a pariah.”
Jupp said potential customers continue to be shunned by major lenders for small credit issues, where building societies continue to be more accepting.
He added: “The current orthodoxy fails to differentiate between the feckless and desperate, whom the industry has every reason to refuse and the still growing rump of customers, exhibiting a past deterioration in their credit history, but having a reasonable explanation which demonstrates the reasons behind their credit record.”
Jupp said: “The UK needs a grown up non-conforming sector to help bring these people back into the fold. They are being stigmatised based on a continuing kneejerk reaction by the larger lending community and wider political perception to the credit crunch that happened over five years ago.
He concluded: “2014 would be a good year to start talking above a whisper about non-conforming clients.”
Magellan came under fire from trade body the Asssociation of Mortgage Intermediaries over the cost and suitability of its products.
However at The Mortgage Event in December, Tony Salentino, director of packager Complete FS, hit back saying the lender had FCA approval and that advisers were best placed to decide on product suitability.
