by Mark Johnston
New Lenders Look to Enter the Market.
The availability of cheap funding lines and schemes such as Help to Buy and the Funding for Lending Scheme means that the UK mortgage market is a very tempting proposition.
Many mortgage brokers believe that more lenders offering more bespoke deals in what is call ‘complex prime’, where the borrower does not necessarily fit the big banks’ scoring systems are needed.
Figures reveal that not fitting a lender’s profile is the biggest challenge for mortgage applicants, at 67 per cent, with 52 per cent pointing to financial difficulties such as county court judgements, arrears or bankruptcy.
Rob Clifford, chief executive at national broker If I Were You, said: “Brokers and consumers alike should welcome new lenders as increased consumer choice is a key objective of this regulatory regime.
Just recently a new near prime lender, Magellan Homeloans, has launched in to the mortgage market offering loans to borrowers with adverse credit as long as borrowers can explain and document the reasons for their financial difficulties and they can also demonstrate a clean credit history for the past 12 months.
The lender has launched with a choice of five mortgages between 65 per cent and 75 per cent loan to value (LTV), all with varying levels of allowable adverse credit criteria. However, all of the products are priced at Libor (London Interbank Offered Rate) plus 8 per cent.
Application fees for these particular deals are on a sliding scale and vary with the price of the property. The completion fee is 1.5 per cent, with a minimum of £995 and there are no early repayments charges.
Magellan managing director Matt Gilmour says: “Our philosophy is we understand people hit difficult patches which can lead to financial problems. In our opinion, a short term financial wobble should not preclude borrowers from mortgage finance on a long term basis.”
Sources have recently claimed that there at least three other firms that are currently applying for regulatory approval to become mortgage lenders and they could be set to enter the first charge mortgage market before the end of 2013.
One of these lenders is believed to be a major new intermediary focused lender, another smaller Buy to let lender has also been mooted as well as at least one other specialist player.
Meanwhile several potential new bridging lenders are also thought to be chomping at the bit to play in the sector once funding has been secured.
It appears that the potential addition of a number of new lenders has been welcomed by both the intermediary sector and the wider mortgage market.
John Grimbaldeston, director of products and marketing at HML, one of the largest financial outsources in the UK and Ireland, has also welcomed the potential addition of the new lenders but warned that they will face a number of challenges before and after their launch.
There are a number of key challenges that face any new lender looking to enter the market. One of the major challenges is the emergence of the mortgage market review (MMR) and getting the right permissions from the regulator.
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