Funding streams, the pressure to lend and good vibrations – The Specialist Lending Senate 2019

Funding market activity was a hot topic among the audience last week with many attendees raising the issue in different sessions and in various contexts.

The ultra-competitive lending market and funding sources have already claimed three lenders in one form or another in recent months and has since seen Magellan close its doors this week.

This was highlighted by one attendee who said: “The pressure to lend is coming back into the market – from shareholders and funders,” with another echoing that it was a “volatile time for funding”.

It was also noted that the big six high street banks are set to benefit from ringfencing which will give them significant volumes of cash to lend “and margin to lend it at”.

And it is the next tier of lenders, often regarded as the challenger or mid-market firms, which were tipped to see mergers and acquisitions.

One such potential transaction has since been outlined between One Savings Bank and Charter Court Financial Services.

Good vibes continue

However, it was not all downbeat as there were positive vibes in general about the specialist market, with it continuing to grow by around 20% in lending volumes last year.

One attendee highlighted that it was a place for brokers to show their expertise that could not fit into technology, with the need for real intelligence not artificial intelligence.

This was exemplified by one case raised – a three-way application between a couple who were divorcing and the wife’s new partner, as the wife did not wish her former spouse to lose the home.

“We are seeing a continued shifting to the specialist market away from mainstream lending and trends like this don’t reverse,” added one attendee.

Brokers and distributors were urged to engage closely with business development managers and lenders to feedback what they were seeing from customers.

“There’s nothing more powerful for lenders and the regulator loves it,” an attendee said.

Buy to let

The increasing complexity of the buy to let (BTL) market is well recognised but it is also being hurt by the lack of movement in the residential market.

With people unable to take their second or third steps on the housing ladder, this has led to a shortage of occasional buy-to- let landlords – those who may buy their next home but let out the current property.

And the Prudential Regulation Authority’s (PRA) rules were also questioned, with one attendee noting that stress tests had done little to improve the quality of lending but had just slowed it down.

“There is a growing awareness among landlords and more savvy borrowers, they are becoming investors and looking to the longer-term, which is right because BTLs typically come good in five years,” one attendee noted.