Recent months have seen a succession of lenders announce successful securitisations, including the likes of LendInvest, Belmont, Kensington and Pepper Money. Just this week Bluestone raised £210m of funding through its inaugural securitisation.
Lenders have also been known to trumpet other funding lines they may have established, such as The Mortgage Lender with TwentyFour, and Landbay with an unnamed institutional investor.
Tesco Bank’s decision to sell its mortgage book has also raised questions about what happens to a borrower when their lender elects to parcel off part ‒ or all ‒ of its lending to investors.
But should considerations of a lender’s funding model come into the advice equation?
Focus on rate
David Sheppard, managing director of Perception Finance, said that he was unconvinced that brokers are too focused on any likely securitisation when recommending particular lenders or rates, arguing the brokers’ role is to secure the most appropriate rate “taking into consideration all the facts on the case”.
He continued: “Ultimately, even if the lender does opt to securitise their mortgage book then the terms of that mortgage will be unchanged for the borrower. It would be impossible for any broker to second guess what a lender may be planning, as evidenced by the news about Tesco Bank.”
Clients left in the lurch
James McGregor, director of Mesa Financial Consultants, suggested that it is important for advisers to keep funding lines in mind when working with clients.
He said: “As we have seen through the last recession, when lenders stop operating as lenders it can have a huge detrimental effect on the client, for example leaving them unable to switch to cheaper options or to remortgage away.”
McGregor suggested it should be “high on the agenda” for brokers, adding: “As advisers we want to make sure lenders will be there for our clients for the full term of the mortgage.”
At the back of a broker’s mind
David Hollingworth, director of L&C, said that it was difficult for brokers to assess how secure a lender’s funding line may be to the extent that they would ever rule out their products.
However, he added: “With a fiercely competitive market and some lenders withdrawing from the market, such as Magellan and Secure Trust, it may be something that sits in the back of the mind of advisers, especially if they are looking at two similar deals.”
Hollingworth also pointed out that it was likely that lenders would continue to publicise details around securitisation and agreement of new funding lines “and it certainly shouldn’t do any harm to broker confidence”.
Funding not important
Andy Wilson, founder of Andy Wilson Financial Services, said that he had “very little interest” in knowing how lenders are getting their funds together.
“It’s largely irrelevant; as long as our clients are granted the mortgage they are promised then it is of little consequence to us or them where the mortgage money originated from.”
He continued: “If a lender says it will lend, I do not believe we can know with any certainty the source of the funds, and nor do we need to.”
