The mutuals have impressed brokers with flexibility on criteria and attention to customers’ specific circumstances, whether they fall foul of mainstream lenders’ criteria by age, employment status, deposit size or property type.
The upside for the mutuals is that margins have remained relatively robust.
“Customers’ circumstances and product requirements are increasingly complex and diverse, requiring a more individually-tailored approach, which large high street brands are unable and unwilling to offer,” said Peter Brodnicki, co-founder and chief executive of the stock market-listed network and advice group Mortgage Advice Bureau.
He noted mutuals’ approaches to “complex income, including shorter periods of self-employment, a more pragmatic approach to assessing affordability, interest-only, minor credit issues, holiday buy-to-let, ex-pat buy-to-let, self build, custom build and complex buy-to-let including refurbishment,” as examples of where they are outpacing mainstream mortgage providers.
The specialism mutuals can wield include flexing criteria and offering a bespoke underwriting service to win business.
David Hollingworth, London and Country Mortgages, associate director, communications, noted Darlington Building Society for “offering enhanced multiples for people in specified professions”, Family Building Society and Loughborough Building Society for their “family-assist structures for first-time buyers”, and Loughborough BS and Bath Building Society for their buy for university solutions.
Leeds Building Society won plaudits for having “championed retirement interest only (RIO) products” and the mutual sector in general was acknowledged for leading the way on older borrowers, with deals for customers of 80 or 85 years old and above.
Coventry Building Society, Skipton Building Society and Tipton & Coseley Building Society all won mentions for their healthy appetite for mortgage lending and ability to take cases on their merit.
Conversations with underwriters
“The big players are very competitive, but the mutual lenders have been emphasising how they can underwrite on a more individual basis to deal with cases that are not quite straightforward, even if pricing of products is increasingly challenging,” Hollingworth said.
Such a bespoke approach “could mean higher rates and help from a margin point of view,” he added.
Jane King, mortgage and equity release adviser at Ash-Ridge Private Finance, commented that “often a smaller lender will ‘take a view’ on a case that’s slightly outside of criteria and, because a lot of the underwriting is done manually, it is often possible to chat to underwriters directly about a case that a larger lender would probably decline.”
King mentioned Ipswich Building Society, Newbury Building Society and Melton Mowbray Building Society as lenders where her company has been placing business.
The downside to the mutual sector was that they are “not keen on stretching income, have hellishly slow administration, require mountains of paperwork and have a limited choice of rates,” King added.
Big lenders lag behind
However, Dominik Lipnicki, director, Your Mortgage Decisions agreed that “they often have a solution when the big boys are not interested.”
“Some are very strong in interest-only, self employed and older borrowers, with a few not having an upper age limit. They look at cases for what they are and make their decision accordingly.
“Many of the big lenders are still behind where they should be in accepting how people work and get paid,” Lipnicki added.
He said that Hinckley & Rugby Building Society “now has no upper age limit and its board meets each day to discuss cases put to them and if it makes sense, they agree them.” Chorley Building Society was also noted as a flexible lender by Lipnicki.
“Flexibility is where, in a competitive marketplace, the smaller lenders can win. It is not all about a race to the bottom in terms of rates,” he said.