We talk lending, product innovation and dual pricing with Steve McAvan, Yorkshire’s group intermediary mortgage product manager.
Why is now the right time to launch into buy-to-let?
The buy-to-let market is something that has been attractive for to the society for a number of years and we’ve looked at launching into buy-to-let on a number of occasions in the past, however, the timing has never quite been right. The merger with the Chelsea Building Society brought with it the opportunity to look at an existing buy-to-let portfolio and monitor its performance in the market.
As you’d expect we’re starting off fairly slowly, working with just two of our key lending partners and only lending in London and the South East to help us bed in our systems and processes, however, once we are sure that everything is as it should be we will look to expand both our availability and our geographical reach.
Yorkshire’s lending doubled to £1.5bn to H1 this year. Can you double it again next year?
The Society has achieved some excellent lending results in the first half of 2011, building on some very strong foundations. We are looking to continue this growth through the remainder of 2011 and our plans for 2012 are pretty ambitious too.
What product innovation does the market need next ?
True product innovation is always difficult, especially in a market as mature as ours. However, we don’t always make things easy for ourselves. A lender’s main way of communicating their products is through sourcing systems and unfortunately, these tend to be a bit limited in the dimensions they can use to show a product to a broker. For example, we have a product available on the market designed to suit customers looking to exploit the current low interest rates whilst providing certainty of rates in later years and these products track the Bank of England for the first two years before fixing for three years. However, on sourcing systems we have to list these as five year Bank of England trackers, not an area of the market where customers are particularly looking. As lenders will only look to create new products that sell in the market, then effectively we are somewhat bound by what will source well and what won’t. I believe an improved relationship between lenders, brokers, and the sourcing system providers will lead to an increase in the amount of product innovation in the market.
A lot of the general focus in the market and certainly the best publicised government schemes are all aimed at helping first-time buyers get onto the ladder, as everyone knows they are the “lifeblood of the market” . However, there’s not a lot of point adding this lifeblood if all of the arteries are clogged. Many of our intermediary partners have customers who first came to them as first-time buyers pre-credit crunch and now find themselves with limited or no equity in their property, and helping these customers find a solution will go a long way to increasing the number of transactions in the market.
What are brokers telling you they want in this market?
We are constantly talking to brokers and our lending partners to try and gain further insight into the market and where possible some competitive advantage. The main thing that I find when talking to brokers is that they want certainty – certainty that when they talk to a customer about a product that it will still be available when they come to apply, certainty around the service levels that a lender offers a broker and certainty that, even if a lending decision is not favourable, that this will be delivered in a timely and efficient way.
Will you be doing any investing in the intermediary channel this year?
We have already invested heavily in the intermediary channel in 2011, one of the key pieces of feedback we have received from brokers has been around the importance to them of service. To this end we have increased our processing capacity by some 30% already this year and are looking at increasing this further into 2012.
Will dual pricing continue for the foreseeable future?
For the foreseeable future it is likely that lenders with significant intermediary and direct distribution will continue to make some differentiation between direct and introduced business, either through product rates or product availability.
Lenders price products to take into account different customer behaviours, different levels of risk and different levels of cost presented through different channels. As lenders and brokers work together to build closer partnerships and the perceived levels of risk in the market fall, then I would expect we will see a closer alignment.
