Speaking to Specialist Lending Solutions after Brightstar’s 10-year anniversary, chief executive Rob Jupp said: “When we started back in early 2011, there really wasn’t a specialist lending market in operation in the UK market, it was entirely shut, so we had to do our bit to reopen it.”
He said this was because the market was still recovering from the global economic crisis and credit crunch, which impacted the liquidity of the UK lending market.
According to Jupp, this meant a lot of borrowers were not able to buy a home as they did not fit traditional criteria and could not borrow.
He said: “Unless you were middle aged, middle class, low loan to value and a home mover you would really struggle to obtain a mortgage. I looked at them [other borrowers] and would wonder ‘why on earth is this client struggling to obtain a mortgage? They have a good job, there is no damage in the background like excess credit, it’s just a little bit unconventional’.”
He said the specialist market started to gain momentum with the likes of Precise and Together in 2012 and 2013, and then in 2014 and 2015 the “world and their wife decided they would fund a lender in that world, and the rest is history”.
After a decade in the specialist market, the company has worked with nearly 30,000 customers on 18,000 completions worth more than £5bn. It also has grown its reach to 75 per cent of the intermediary market and its team has expanded to 85 employees.
Speaking on more recent market conditions, Jupp said the specialist lending market “fared well” during the pandemic, especially those who used automatic valuation models at a time when valuers were unable to visit sites.
“Most of our lenders continued lending, only a small number didn’t. There was a lot of maturity, most lenders didn’t knee jerk. They worked with borrowers and supported borrowers with payment holidays.”
He continued: “The pandemic has created a massive, renewed spirit of opportunity, where the specialist market is now awash with potential borrowers that need to use that market in order to provide an entry to home ownership.”
He added that consumers were more aware of the specialist lending market and said there were increased options to achieve home ownership outside of traditional lenders.
“The specialist lending market is a very good pathway and entry point in to lending. There is no shame at all about using a specialist lender for a mortgage. You could be self-employed or have different income streams or had a tax issue in the past, or you want to buy a property with unusual construction or build a property in your garden. You can do a range of things.”
He added: “In the past if you needed a specialist mortgage you were sub-prime, and that could not be further for the truth now.”
Looking ahead, Jupp said the question around how to reach carbon neutrality would become increasingly important to lenders, particularly as one of the largest pollutant emitters is property .
Jupp added: “What we are finding is a revolution whereby it will be commonplace that people who take green mortgages will be very much rewarded and incentivised by their lenders on the basis that they will get a better price for their assets if they are more environmentally sound.
“That is growing by the day, not just because of COP26. Every lender I speak to the green agenda is at the forefront of everything they do.”
He cited upcoming legislation in three years’ time requiring landlords to get their existing properties to an EPC rating of C or above as an example of this, adding that many were uncertain as to how they would fund it as the bill for portfolio landlords especially would be “significant”.
“I think a lot of lenders in the mainstream market in the years to come will say if you’re buying a particular housing stock that isn’t energy rated A, B or C you might not be able to get a mortgage, we might not lend on that. Actually, energy ratings may be as significant as someone’s current credit rating,” he said.
He added that from a product innovation perspective, the specialist lending market had a key role to play and its actions would inform the mainstream market.
He said: “If we do it right, what we do is provide the environment and a template for mainstream lenders with cheaper cost of funds to replicate and produce mass market solutions. That’s where the specialist lending market is so imperative in the UK as it gives the intellectual capital of ideas to the mainstream market to improve on for the benefit of consumers.”
Changing role of the high street
Jupp said pandemic had “sped up the inevitable demise of the high street as a place to shop and to eat” and it would now be a “place to live”.
He said five years ago it would have been rare to get planning permission to convert flats above shops and there was no real need as retail tended to be on long-term contracts.
However, the high street has since changed with the growth of out of town and online shopping. That has left “swathes of vacant properties at ground level and above that are absolutely perfect housing”, Jupp added.
He said he expected the process of development to become “easier to realise” and this would occur on almost every high street. He added that this was already occurring in some areas.
“The CBD [central business district] is not going to be a place where people just go to shop and eat. It will be a place where they live, and probably eat and probably shop, but not very often. There might be a few nice shops and a few corporates, but it will be mainly independent retailers, nice restaurants, and places where you want to live,” he said.
This would provide opportunities for renovation, refurbishment, conversion, bridging and and so on, and will be something the specialist lending market should keep an eye on.