OSB: Second charge market risk not always reflected in prices

The lender told Specialist Lending Solutions it was happier to see a reduction in volumes rather than follow others taking potentially expensive higher risk lending decisions.

One Savings Bank sales and marketing director John Eastgate (pictured) said the current competition in the market saw lenders relaxing pricing or lending criteria, or in some cases both, to maintain lending volumes.

“We have certainly seen pricing in second charge markets falling for some while, to the extent that we have, at times, determined that the risk-reward dynamic was not one we were comfortable with,” he said.

“That being the case, we have been happy to see volumes impacted rather than sell mortgages at rates that do not adequately compensate for the risks that we are asked to take.

“The external economic environment is not without its challenges at the moment and we believe it appropriate to retain a prudent approach to the market,” he added.

In its first half year results published last week, OSB revealed its second charge loan book slipped by 6% to £389.9m in the first six months of 2018 from £415.3m in the final six months of 2017.

“We maintained appropriate pricing for risk in this sub-segment as competitive pressure in the second charge market caused price reductions and we allowed our market share to fall,” it said.

Not sacrifice quality

This was echoed by Charter Court Financial Services, parent company of Precise Mortgages, which also said it was not willing to sacrifice quality of lending for volume.

In its interim results, regarding second charge the lender added: “During the first half of 2018, Charter Court maintained its focus on high quality lending at appropriate margins, prioritising quality over volume of loans.”

It’s second charge business dropped to £27.1m from £31m in the first half of 2017.