The tougher climate has been hard for brokers and borrowers alike, with many creditworthy and financially responsible clients struggling to gain access to the finance they need and brokers facing continued challenges when trying to place business, leading more to look at specialist lending.

While some of these individuals may indeed have had some sort of blip on their credit record, for many others, falling foul of mainstream lending criteria has simply been due to tougher market conditions and growing affordability pressure.

This has resulted in an increasing number of brokers and borrowers seeking viable lending alternatives to address their borrowing needs, which has subsequently led to increased awareness and knowledge of the specialist lending market.

While there are now signs that the mortgage market and wider UK economy are starting to stabilise, the growing demand for specialist finance looks set to stay. According to figures from specialist lender Together, the proportion of specialist mortgages is expected to treble in size by 2030, with an estimated half a million mortgages dependent on the growth of the sector.

In addition, the value of specialist residential mortgages specifically is also set to increase from £5bn to £16bn during this time. Similarly, figures from the Bridging & Development Lenders Association show an increase in the size of bridging loan books in the first quarter of 2024, rising by 6.8% on the final quarter of 2023 to reach £8.1bn.

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Growth of specialist lending ‘no surprise’

The growth of the specialist lending sector is no surprise given recent market conditions have only served to highlight the shortcomings of the one-size-fits-all approach of many mainstream mortgage lenders when it comes to assessing the creditworthiness of many financially responsible borrowers.

This, coupled with heightened awareness of the specialist lending market, its common-sense approach to lending and wide-ranging borrowing options, signals a golden opportunity for ongoing growth in the sector and increased business opportunities for brokers.

Over the last 18-24 months, many people who would not typically use specialist lending have accessed the market due to difficulties securing borrowing in the mainstream market, whether this is because of stricter lending criteria, the way the deals are structured or even the type and location of the property they are buying.

Not only has this opened up ample opportunity for brokers to tap into a fast-growing area of the mortgage market, it has also opened their eyes to the speed, flexibility and personalisation of many specialist lending solutions.

Products such as bridging loans, second charge mortgages and buy-to-let (BTL) products are now also being recommended by a growing number of brokers, many of whom may have traditionally shied away from this area of the market.

Whether these brokers chose to advise on the products themselves, or refer the clients to a specialist distributor, the turbulence and unpredictability of the last few years has opened up opportunities for brokers to grow their business and reach more clients than ever before.

 

Role of the broker is ‘more important than ever’

Being able to access specialist lending is extremely appealing, particularly in tougher market conditions. And with more borrowers than ever before falling outside the parameters of mainstream lending, the role of the broker is more important than ever.

Brokers and borrowers alike are beginning to realise that specialist lending is not just a solution for tougher times, but does in fact offer viable alternative lending solutions to borrowers looking to achieve their ambition of owning a property.

This mindset is likely to continue as confidence in the market begins to return, with increased appetite for portfolio expansion in the BTL market highly likely alongside heightened demand for investment opportunities around houses in multiple occupation (HMOs), holiday lets, student accommodation and social care housing.

Similarly, confidence in the residential market is likely to improve and many of these borrowers will continue to need access to specialist lending and tailored products that best suit their needs, especially as affordability challenges look set to continue for some time.

For brokers looking to tap into this ever-growing area of the mortgage market, this presents an ideal opportunity to help their clients achieve their goals while also generating more income and exploring new business opportunities.