Specialist lending encompasses complex buy to let, second charges, bridging and commercial lending. The gradual creep of this market into the mainstream mortgage sector was clearly evidenced at Mortgage Solutions‘ inaugural round of shows in January, The Specialist Lending Event, where some intermediaries were left with standing room only.
Brokers’ enthusiasm for specialist lending ranges from an ‘it’s not for me’ attitude to a ‘how do I get more involved’ proactive approach, but how easy is the sector to break into?
This week’s panel of intermediaries talk about their attitudes and experiences of specialist lending in their day-to-day client meetings.
Simon Collins, product technical manager at John Charcol, says borrowers’ search for great yields has seen more ‘weird and wonderful’ buy-to-let cases cross his desk but second charge enquiries are storming ahead.
Matthew Fleming-Duffy, mortgage and finance broker for Cherry Mortgage & Finance, says bridging finance and mortgages for professional landlords are becoming a larger part of his business.
Dean Mason, practice principle of Masons Financial Policy, says with the Mortgage Credit Directive imminent, specialist lending solutions are being discussed more than ever with clients.
Simon Collins is product technical manager at John Charcol
We have certainly seen an increase in specialist lending, particularly second charges, bridging and complex buy to let.
The bridging market from the borrower’s perspective has definitely benefitted from a huge increase in competition over the past few years. The increased coverage and awareness will also have contributed to the rise in lending by bridging lenders, to the point where even some of the regional building societies have entered into this sector.
Complex buy-to-let cases have always been quite common, but again, as borrowers have been searching for greater yields we’ve definitely seen an increase in the ‘weird and the wonderful’.
The biggest growth area has definitely been the second charge arena, with much of the increase coming from borrowers’ desire to protect the very low tracker rates/SVRs they may be on along with those who are on interest-only and don’t want to lose that facility.
In a lot of cases, the original lender was unable to meet the borrower’s request for additional funds, so the fall in the pay rates, along with the increased competition in this sector has meant that a second charge has become the more beneficial option. Second charge lending has soared in recent years, and is up around 635% on where we were in 2011. It’s this huge increase in second charge lending that we’ve seen in recent years, which has undoubtedly played a part in our recent acquisition of Simply Finance, which is an excellent fit in our overall strategy for 2016 and going forward.
Matthew Fleming-Duffy is a mortgage and finance broker for Cherry Mortgage & Finance
As a mortgage brokerage, we have a wide range of lending options available for most types of property transaction. We receive enquiries from first-time buyers, remortgagors, homemovers, landlords and property investors.
It’s for the latter two categories where specialist lending frequently becomes the most appropriate solution. This may include bridging finance for unmortgageable properties that need refurbishment, portfolio lending for landlords with multiple properties or, more common these days, landlords seeking to purchase or refinance properties via a limited company.
With increasing access to huge volumes of information on the internet which can sometimes be conflicting or even incorrect, it makes sense for consumers to seek the advice of an experienced professional when considering something unusual.
As brokers, we take the time to understand a client’s personal situation and financial requirements before researching and presenting an appropriate solution. One particular area of our own expertise is in lending to expats. For these cases location, type of employment contract, currency of pay and tax residency of a client are paramount to understanding which mortgage lenders will consider lending.
It is a potential minefield if you do not fully understand the nuances and exceptions to criteria that lenders will operate under, and as a consumer – or inexperienced broker – this information can be very difficult to obtain. The years of experience gained, coupled with direct underwriter access in many cases, can present specialist lending as a very marketable opportunity to most intermediary businesses.
Dean Mason is practice principal of Masons Financial Policy
As the implications of the Mortgage Credit Directive (MCD) affect parts of the mainstream as well as second charge markets, specialist lending comes up more in conversations with clients than ever before. Some of the Mortgage Market Review’s idiosyncrasies have also driven some down this road. We have always acted as introducers in this arena and have over the years used several specialist or commercial packagers with varying degrees of success.
We are being told by the regulator that under MCD we will need second charge loans readily to hand in our advice toolkit and I suspect those conversations with clients, coupled with a reliable contact whom we trust to get the job done, have led to increased business levels in this area.
I guess lack of regulation and perceived non-compliance has prevented us from jumping into this with both feet in the past, but with that all set to change next month we are already looking into ways of maximising these potentially lucrative avenues of income. Certainly on the commercial side the cross-selling opportunities that can arise from helping an SME expand or ease cashflow by arranging funds for them are almost endless, so that is a clear incentive. And so is a more holistic advice and referral platform for clients overall.
