Specialist sector will ‘spread its wings’ in 2024, brokers say

Scott Taylor-Barr, principal adviser at Barnsdale Financial Management, said that it was “time for the specialist sector to really spread its wings in 2024”.

He said that historically specialist lending has been a “more polite word” for adverse credit lending and a “huge portion of the sector is still focused in that area, which is a shame”.

Taylor-Barr continued: “As the top tier lenders fight over being the lowest cost mortgage by 0.01 per cent, the need grows for the lenders happy to consider the less straightforward cases; those working multiple jobs, or with strange income patterns, gig workers, bank workers, low basic high bonus employment, visa applications, or those with limited time in the UK.

“These are all examples of areas where the “computer says no” style of underwriting used by the largest players falls down and the hands-on, experienced, real-world underwriters employed by the specialists can really shine.”

Alastair Hoyne, chief executive at Finanze Group, agreed and added that there was a “need to remove the historical association of specialist lenders with ‘sub-prime’ products”.

“In fact, we’ve seen some real innovation with those most agile lenders taking advice from us at the coal face and adapting and developing products to suit changing and emerging needs and opportunities,” he noted.

Specialist lenders can ‘really stand out this year’

James Miles, director at The Mortgage Quarter, said it had seen specialist lenders “lead product change and development” and this trend would continue.

“Specialist lending has come at a premium but they can really stand out this year and offer something new such as generational mortgages and further support for deposits and affordability by being more creative.

“With flexilbility and less legacy system, specialist lenders have a hand-up over the juggernaut high street lenders who are focusing on the bottom-line and their shareholders,” he noted.

Justin Moy, managing director at EHF Mortgages, said that it started to see many lenders, both specialist and mainstream, “overhaul their lending criteria, allowing more people unable to borrow to be in scope”.

“There will be more clients who would probably fit under the ‘near prime’ category, so have missed or been late with a few payments but not extreme. This is the space many of the building society lenders are looking to support, and there is every chance that high street lenders will be interested in these clients too, recognising that these borrowers were typically ‘prime’ and circumstances have not been easy.

“Rates priced between prime and specialist sectors will give a good return to lenders, and a more viable option for those new borrowers within this market,” he added.

Growth areas

Hoyne pointed to the growth of supported living, holiday lets and high-quality houses in multiple occupation (HMO) as areas of “lucrative business”, adding that title splitting was also an area of growth it expected to continue this year.

“Criteria needs to take account of established as well as new investors and underwriting must keep pace with changes in investment strategies,” he said.

Adam Smith, founder at Alfa Mortgages, said that in the last year it had been “diving deep into commercial mortgages and bridging finance”.

He noted: “The more we do, the more people are pointing others our way. Looking ahead to 2024, we’re pumped to ramp up our efforts in bridging, which is totally in the spotlight now. It’s like a must-have tool for any investor, and we’re all about making it even bigger.”