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Gross specialist lending grows threefold since 2009

The value of specialist mortgage lenders’ annual lending has increased 19% per year since 2009, according to a new report from the Intermediary Mortgage Lenders Association (IMLA).

The report, titled ‘The rebirth of specialist lenders’ indicates that specialist lenders are strengthening following the market’s turbulent history and are benefiting from the growing volume of ‘non-standard’ borrowers under The Mortgage Market Review (MMR).

Originally coming to prominence in the 1980’s and having to exclusively rely on introductions for business and wholesale markets for funding, specialist lenders began to serve growing, niche market segments, particularly buy-to-let and lifetime mortgaging 10 years later.


Commenting on the impressive growth, executive director of IMLA, Peter Williams, said that specialist lenders have ‘capitalised on the growing demand for products’.

“Mortgages are not ‘one size fits all’ products and as such, the number of borrowers with ‘non-standard’ needs is increasing,” he added.

Since the recent financial crisis, the segment’s growth stems from serving niche markets that received less attention from mainstream lenders.

Tougher regulations proved to make the process more complex for large institutions, which provided specialist lenders with the opportunity to establish their presence in the market through their flexibility and innovation.

Buy-to-let mortgages, specialist residential mortgages, bridging loans and second charge mortgages remained as the staple of specialist lenders’ business during its growth years. As the segment influenced these key products, the buy-to-let market rapidly expanded.

IMLA’s report suggests that specialist lenders have a firmer footing for the future, being well-equipped to provide the finance they need.

Firstly, intermediaries can scan all lenders for the most appropriate loan for a customer based on price, suitability and security, rather than brand – this gives the newest mortgage brands the opportunity to compete with the intermediated market.

Additionally, IMLA highlights that there is a substantial unmet demand, as specialist lending levels are below those of the pre-financial crisis era.

The number of self-employed people has increased to 4.8 million in the UK, and there were 912,000 county court judgements issued against consumers in England and Wales, which could potentially limit people’s access to mainstream lending in the future.

This data supports the growing market and the opportunities it presents for specialist lenders.

“The growth of these lenders has been good for consumers too,” Williams continued. “It is important that mortgage finance is available to a broad range of borrowers, and by serving ‘non-standard’ areas of the market, specialist lenders are supporting inclusiveness while holding true to today’s strict affordability criteria.”

While higher regulatory capital requirements have left most specialist lenders at a disadvantage, they have also given the sector more stability.

Williams added: “There is strong evidence to suggest that specialist lenders can now break the cycle that has defined the segment in the past.”

“The range of borrowers who qualify for a mortgage on standard mainstream terms will remain restricted, and the mortgage market is also becoming increasingly intermediated.”

Specialist borrowers are also subject to the same affordability checks as borrowers across the market, but manual underwriting allows specialist lenders to take borrowers’ personal circumstances into account, providing greater flexibility.


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