TSLE: Specialist lenders can provide ‘immediate solution’ for brokers and borrowers – Kirby

Speaking at The Specialist Lending Event in Birmingham, Chris Kirby (pictured), head of key accounts and specialist distribution at The Mortgage Lender, said: “Specialist lenders provide an immediate solution for borrowers and from a broker perspective, a temporary one.

“So, when the high street says no, you place that mortgage now and a couple years down the line, whether it’s two years or five years because of affordability, you’ll hopefully be in a position to move that same customer to a high street lender.”

He continued: “We’re here to provide that immediate solution which is ultimately going to help your businesses grow. We’re in challenging times at the moment as fewer customers are fitting the high street mould. More and more customers are needing alternative solutions.”

Specialists helping FTBs

Caroline Mirakian, head of national accounts at Aldermore, said that specialist lenders could really help first-time buyers as they looked at cases on its “own merits”, as they could manually underwrite and had more flexibility.

She noted that at Aldermore, it had an exceptions policy where brokers could phone the business development manager and say they have a case slightly outside of the criteria but it could still fit.

“The number of times I’ve seen it turn around in a very short space of time is phenomenal and actually really makes a difference in somebody’s aspirations,” Mirakian added.

Kirby said that specialist lenders would often offer high income multiples, consider more income such as multiple jobs, bonuses, complex incomes and self-employed status which would also aid first-time buyers.

He added that specialist lenders would also have “flexibility around gifted deposits”, being able to consider parents, grandparents and possibly non-family.

“Work with the lenders, work with your distributors to understand which lenders will allow you to maximise affordability because that may be the solution for first-time buyers you didn’t know existed,” Kirby said.

He said that five years ago most specialist lenders would be associated with adverse credit, but the majority of cases that distributors were bringing to TML were self-employed affordability issues or complex income cases.

“I think the perception of specialist has changed and will continue to change.”

‘We are going to be more expensive than the high street’

When asked about whether the higher rates of specialist lenders could put off first-time buyers, Kirby acknowledged that specialist lender rates were not going to be as “competitive” as the high street, but “you’re only going to approach a specialist lender or specialist distributor because the high street lenders said no”.

“I think from a rate perspective, we are going to be more expensive than the high street. We are taking more risk that the high street doesn’t want to take on whether that’s because of credit or their self-employed status or because we have been more flexible with income. We get that. We are an immediate and temporary solution for your customers,” he noted.

He continued that at the end of the day it came down to satisfying customer’s need of what they wanted to borrow and the affordability.

“If you can satisfy those needs, then the rate is really just a product of that, it’s just an incidental if the customer says they can afford £2,000 a month and you’ve done your due diligence with them and it fits the affordability calculations of the lenders, then you are bound by regulation to recommend the most suitable product for that customer based on their needs.”

“With Consumer Duty coming over the horizon, which is Treating Customers Fairly (TCF) on steroids to some extent, you’re bound to recommend the most appropriate thing for your customer so if you can satisfy the need for what they want to borrow and how much they can afford to pay and the right product, then the rate is the rate.”

‘Still a market’ for high income multiples

Kirby said that offering high income multiples was about “finding that balance between lending to satisfy affordability needs, but also lending responsibly”.

He continued: “For those customers who have borrowed the absolute maximum six times income, they’ve got a greater risk of going into arrears and going into default if they stretch themselves initially when the rate is low, although obviously that was the reversion rate plus three per cent that would have been factored into affordability calculations for lenders.

“There is absolutely still a market for it. I’d like to think that it’s something that we will be able to move into for the right people.”

Kirby added: “Lenders have got an appetite to lend increased multiples to the right people. I think there’s also an argument as well from an interest-only perspective to make it more flexible on affordability because typically the interest-only customer that we would expect to loan to when we move into that market is going to be more financially sophisticated.

“The higher interest-only is more of a lifestyle choice, as opposed to a necessity to maximise and stretch affordability as much as possible.”

The Specialist Lending Event continues this week with events in Wetherby and Bolton. If you are interested in attending follow this link. 

The views of the panel members do not necessarily reflect the views of the individual’s company.