The Finance 4 Business head of intermediary relations noted that UK property was still seen as a very desirable asset by investors and that the market was already seeing greater lending risks being taken to access it.
However, he warned that should things go wrong it would be customers to lose out as he believed these lenders would not take such an ethical approach to repossessions as mainstream banks.
“There’s a little bit of a warning bell that needs to be sounded on this,” Pinnington said.
“High street banks are happy with the margins they can earn on their money but these low rates are not attractive to investors – they want that return so they shift the risk curve up or lift the loan-to-value (LTV).
“It’s nice to have that return of 4% not 1.5%, but to get that you probably have a borrower or property that’s got a problem or an LTV where you’re assuming the property market is never going to take a dip,” he added.
The search for greater yield has resulted in the re-emergence of sub-prime lenders during the last two years, but Pinnington noted these firms were doing so sensibly because they were experienced lenders.
“It’s just whether some of the private institutions are as sensible?” he continued.
“The sad thing is, the investors won’t lose out, it’ll be the clients with the mortgage when it comes to a repossession.
“The big banks have very ethical policies when dealing with borrowers in difficulty, but I’d expect private lenders are going to be a little bit more ruthless because they just want the cash back, and that’s where the problem will lie,” he added.