Wider funding, greater risk taking and distributor consolidation – The British Specialist Lending Senate 2018

The two-day event brought together the industry’s key players to debate the major topics and sketch out plans for where they believe it will go.

With returns in mainstream lending and property investments so limited due to macro-prudential regulation and interventions, the specialist arena is proving a popular outlet.

This means greater capital to facilitate unusual projects or to service customers not presently serviced by the major high street lenders and could prove a boon to the industry.

However, the additional funding could see a wider risk appetite from lenders and funders.

“As a profession, how are we going to take these powerful macro trends and make sustainable outcomes for the customer?” asked one attendee.

Another questioned: “How can we deal with this short-term investment money in a relationship business?”

AI 15 years away

Technology also proved a topic of interest throughout the event.

The role of digital only brokers has come under scrutiny in recent weeks as some re-position themselves into different business models.

One attendee noted: “Artificial intelligence will not be doing this [mortgage advice] for 15 years. Technology is coming, but not as quickly as we think.”

Another attendee added: “There is a lot of hot air with regard to systems, but it would be short-sighted not to expect consumers to drive some of this development.”

Open Banking was also recognised as a potential boost for the specialist market, potentially making access to detailed account information far easier for brokers and lenders to assess affordability and to place cases.

Distributor consolidation

A bridging market study by EY earlier this year suggested, among other things, that there will be a renewal of the trend of lenders buying distributors.

There was some acknowledgement that this could occur within the specialist lending sector, but greater expectation that there would be more consolidation between distributors themselves, rather than direct lender involvement.

As for the bridging sector, delegates were generally positive that it had become more diverse and noted loan sizes were becoming smaller as investors targeted different areas.

Mixed property types were also becoming increasingly common.

More complex borrowing needs

For the second charge market, there was an acceptance that while growth in the sector was encouraging, it was not operating as efficiently as it could be.

One attendee noted there were only around 15 key master brokers in the sector which was concerning to have such a concentration, while others added that lenders needed to take some responsibility for the sector too.

“Brokers don’t understand the fees and we have a role to play in that,” another delegate continued. A third echoed others in agreeing that the push towards transparency was a good thing: “There needs to be transparency of fees, what is being charged and where it goes.”

Later-life lending and those with more specialist needs were highlighted as other areas with the expectation of continued growth.

This was particularly noteworthy as the number of county court judgments continues to rise along with the number of people with more complex needs, such as those self-employed, with multiple or unusual incomes.