Old hands HSBC, State Bank of India and TSB have started using the mortgage intermediary channel for distribution in the last six months. Fleet and Pepper are new names to join the broker-only channel while Foundation Home Loans, Atom Bank and rumours of plenty of others continue to circulate.
So what does this mean for products – more of the same? The buy-to-let market is attracting a lot of competition while the high street battles it out on price but how will the shape of mortgage products change as the market evolves?
We’ve asked our panel of experts, given the increase in competition – what they expect the product landscape to look like at the end of 2015.
Dale Jannels considers the market niches yet to be explored which could preview the direcion lenders could take this year
Paul Brett, director of business development, Foundation Home Loans, looks at the product strategies lenders may choose to follow
Danny Waters, chief executive of Enterprise Finance, looks at the contrast between specialist lenders and the high street when it comes to product innovation
Dale Jannels is managing director of All Types of Mortgages
There is huge competition in rates across the whole market and it really is a case of ‘how low can you go’.
However, as rates continue to decrease, lenders seeking an increase in market share, or indeed to join the market, will have to consider criteria and service as their main selling points in order to make an impact.
The names of a number of new entrants looking to launch in the not to distant future have all been mentioned (one with a fantastic name!) a number of times in the press. Products in the main have not been finalised but many are looking at niches within the buy-to-let sector. As first-time buyers continue to struggle to get on the ladder, the buy-to-let sector is set to remain strong and as such competition with criteria niches and those looking to assist borrowers with a credit blip or two are sure to be successful.
Demand also dictates that new lenders should consider not only market niches, including Right to Buy, shared ownership and the increasing near prime sector, but also geographical elements such as Scotland and Northern Ireland are at a considerable disadvantage when it comes to specialist lender choice.
Innovation will come with technology as well as product niches. The next generation of mortgagees will be ‘handheld’ based and there’s no escaping that. But let’s also not forget those who just like a good old face-to-face conversation with a human being. They still play a large part and, while the internet continues to confuse many, will most likely remain so for some time yet.
Paul Brett is director of business development, Foundation Home Loans
For brokers and their clients, the abundance of new lending choices means that competition both in product attractiveness and pricing will be fierce and therefore very welcome.
The challenge for all new lenders is to be able to offer a strong identity with an attractive product/pricing matrix. This needs to be backed up by service to intermediaries and their clients which makes the process as easy as possible. Simple.
Regardless of sector, formally regulated or not, the spotlight is firmly on responsible lending. Therefore newcomers could look to build market share by offering loss leaders to generate initial interest, while others will major more on the strength and pedigree of their management teams with a proven past track record. Others will aim to be keenly priced or look to fill certain niches as their particular calling card.
To establish defining USPs, which go beyond the usual marketing hype, will also depend on distribution strategy. Without established branch networks, clearly the majority will seek access to the intermediary market. This will be either by opening their doors directly to adviser firms. or more likely by establishing a series of relationships through the revitalised packager/distributor route to act as conduits to the wider market.
Provided lenders are offering a consistent product and service proposition for their clients, intermediaries should be looking to support those with the strongest financial foundations and the desire and backing to be here for the long term. This, ultimately, will decide the winners and losers among new lenders far beyond 2015.
Danny Waters is chief executive of Enterprise Finance
New lender entrants in any sector are always welcome for the increased competition – and therefore variety. They provide for brokers and clients, but it’s been some time since a mainstream lender has launched a truly innovative, ground-breaking mortgage product.
Cast your mind back over the past few years and the home loans that have grabbed the attention have done so because of the loan-to-value ratio or the rate on offer which is more about lender attitude to risk than what I would term true product innovation.
We are seeing more creativity on the specialist lending side of the fence, where providers are more aware of the need to be flexible – and quick – to get deals across the line.
Across the bridging, commercial and secured loan markets we have seen genuine appetite by lenders to create products born out of genuine consumer need, rather than just tinkering with the small print which seems as bold as high street lenders are willing to be at present.
Length of term seems to be the current obsession in the mortgage market with 10-year fixed rates increasing in availability, but aside from this it’s probably not worth holding one’s breath for a dramatically altered mainstream mortgage market by the end of 2015. As is becoming the norm, the truly interesting action will be taking place in the specialist sectors.
