The trade body noted that the “highly competitive” nature of the market at the moment, coupled with subdued activity, was spurring lenders to move into offering deals at higher LTVs and exploring specialist areas like later-life borrowing or self-employed mortgages.
However, Kate Davies (pictured), executive director of IMLA, suggested that lenders are “likely to be cautious”, noting that with lenders having to hold more capital against mortgages as a result of the Basel scheme, it may be that mortgage spreads cannot go any lower.
According to the latest Credit Conditions Survey from the Bank of England, the spreads on mortgage lending have remained unchanged over the last quarter, but are expected to widen – and increase mortgage rates – in the second quarter of 2019.
Davies added that the market was likely to continue to be challenging in terms of just how much business can be written “at sustainable margins”.
“Lenders will no doubt develop new and innovative products to meet consumers’ needs, but must do so within the inevitable constraints of the regulatory and prudential framework,” she continued.
The cautious note follows the warning from the Association of Mortgage Intermediaries earlier this month that the compression of margins was a serious concern, with “too much money chasing too little return”.
However, brokers argued that their focus had to be on finding the best deals for their clients, rather than concerning themselves with lender profit margins.