Steve Walker managing director of Promise Solutions told Specialist Lending Solutions that he felt Vida’s decision pointed to how competitive the market is, which was a good thing for brokers and consumers.
“Rates are still exceedingly low with many lenders offering rates below 4% and the criteria and approach to lending is still very positive,” he said.
“So with 20 lenders in the mix it is difficult for any new entrant to compete unless they are prepared to do so on rate or risk.”
However, he added that lenders needed to be able to find their niche to compete in.
“If competing on rate is not an option, due to the way they are funded, they need to find niches at an acceptable risk which other lenders are not filling and generate sufficient volumes to feed the machine they have created to handle it,” he said.
“That’s no easy task unless their underwriters are very accessible, and sufficiently skilled to shape and accept cases other lenders with a more regimented approach can’t accommodate,” he added.
Offer something new
Vida launched its second charge offering in May for residential and buy-to-let business with brokers able to submit cases through eight master broker firms. However, this week confirmed it is putting it on hold.
Positive Lending marketing director Anna Bennett echoed much of Walker’s sentiments.
“We think it is a shame that Vida aren’t continuing with seconds,” she said.
“They’re a well organised lender whose business development manager and underwriter teams are good to deal with, we will continue to have them on panel for their first-charge mortgage offering.”
She added that it was a competitive market with attractive variable and fixed rates available, but this could prove difficult to break through.
“New entrants considering launching into seconds will need to ensure that they offer something different, whether it be criteria or rate driven,” she said.
Appetite to grow market
However, Complete FS director Phil Jay (pictured) was more confident despite Vida’s decision to put its proposition on ice.
“The seconds market continues to be a very interesting market, rates have reduced so clients are definitely benefiting from this increased lender and master broker competition,” he said.
“There’s room for both the vanilla second charge lender and the more specialist ones, no different than in the first charge market. I see Pepper Homeloans have recently acquired an established second charge lender.
“Our opinion is that there’s definitely an appetite to grow in this market, what will help is the links with technology and the reduction in master broker fees making it a viable option versus a remortgage,” he added.
Vida Homeloans was unavailable to comment.