Specialist lender calls for drastic rethink of mainstream mortgage market

A study of 7,000 people by a specialist predicts the UK specialist residential mortgage market will treble to £16 billion by 2030.

The study, by Together, also predicts the overall UK residential mortgage market will expand by 56 per cent over the next eight years with 500,000 mortgage applications dependent on specialist lenders doubling their market share to 4.0 per cent.

Dr John Glen of Cranfield School of Management, who worked on the study, says: “This study shows that as many as half a million future applicants could be locked out of the mortgage market without the support of specialist lenders. This highlights systemic issues with the mainstream mortgage process which currently bars many potential buyers who have non-standard criteria.”

Glen says many more potential homeowners are expected to fall outside of traditional mortgage selection criteria in coming years as structural changes, such as the rise of the gig economy and the growing trend towards flexible working and the emergence of the non-nuclear family, alter our housing needs. 

He also says the shorter-term risk appetite of mainstream lenders will be a key factor, as they continue to tighten lending criteria at the same time as potential homeowners grapple with the cost of living crisis. The impact of rising inflation will also dent potential borrowers’ ability to access consumer credit.

The study of over 7,000 consumers, conducted for Together by Opinium, shows that in 2021 just seven per cent of applicants had taken out a mortgage with a specialist lender. 

However it claims 53 per cent of respondents to the study fall into one or more criteria category classed as ‘non-standard’.

Having non-standard income (including multiple and complex incomes or being self-employed) was cited as a key reason for being rejected for a mortgage.

Having impaired credit or being over 55 or divorced and considered a non-standard profile also worked against applicants, as did being in a non-standard buying situation like shared ownership, or wanting to buy a non-standard property.

Gerald Grimes, group chief executive designate at Together, says: “The UK’s mainstream mortgage system just isn’t adapting fast enough to how we live. Every year, an increasingly large group of potential homeowners must navigate a needlessly complex, intrusive, and time-consuming mortgage journey, with many facing outright rejection at the end of it. 

“If our aim is to support ambition and make homeownership more inclusive and achievable, it's time the industry, supported by the Government, rethinks how borrowers can access finance to realise their dreams of homeownership.”