Bridging Introducer – Oct 2022
Donna Wells, Director at Envelop
It’s been an ‘interesting’ few weeks for the UK economy and the mortgage market. This is a period which has pushed lending boundaries and really demonstrated the value of advice for all borrowers and the importance of packaging partners for brokers when it comes to securing a range of specialist solutions in such a turbulent lending environment.
In last month’s piece – which seems like an eternity ago now considering all the changes that have taken place across the market – I looked at the momentum being generated in these specialist markets. The past few weeks have further exemplified this trend and with growing uncertainty surrounding the state of the economy, compounded by the cost of living crisis and multiple Base Rate hikes, an overwhelming 94% of mortgage intermediaries have indicated that they expect the specialist mortgage market to grow further over the next two years.
The continued growth of specialist lending
This was highlighted in findings from UTB as part of extensive research for its new mortgage white paper – ‘Growing opportunities for brokers in the specialist mortgage market’. Within this, 57% of respondents predicted significant growth of up to 20%, whilst a further 17% expect the market to expand even further.
The report revealed the specialist niches brokers believe offer the most growth potential in the near future. The top 5 being:
- Borrowing into retirement – 61%
- Self-employed applicants – 52%
- Multiple income applicants – 49%
- Second charges – 43%
- Adverse credit applicants – 38%
The report also found that ‘specialist’ cases were an excellent source of new business with brokers indicating that 73% of the specialist mortgage applications they deal with come from new clients. Furthermore, successfully helping a customer with more challenging requirements can lead to greater loyalty. 92% of brokers said that specialist mortgage customers are more likely to approach them again, having demonstrated the value they added to the process and the outcome. There was also a higher chance of customers referring friends and family.
With a greater number of borrowers, both potential and existing, likely to slip into the more specialist lending bands, these results are hardly surprising. However, they do highlight the opportunities on offer for intermediaries throughout the specialist lending markets, especially for those who are working with a trusting packaging partner.
Bridging and the importance of parental support
Many of which will continue to emerge within the bridging finance marketplace, some from sources which may not have always been associated with this sector. Bridging Finance Solutions (BFS) recently reported a sharp rise in the number of clients securing bridging loans in order to support their children through the purchase of property. BFS suggests that young aspirational home owners, keen to take their first steps onto the property ladder, are faced with unaffordable house prices coupled with rising interest rates and reluctant lending. Increasing the size of the deposit will inevitably improve the rate whilst parental support will provide the opportunity for their children to take that major leap onto the property market, it argues and this represents an interesting area to follow.
As the lending landscape continues to change, it’s evident that all borrowers need to assess a wider, more considered range of solutions to meet their present and future needs. Again, this is a trend which only serves to further highlight the importance and value of the advice process.
Commercial finance support
Rising costs are not only impacting individual borrowers but, just as many were getting back on their feet following the impact of the pandemic, they are also severely affecting businesses across the UK.
As a result, more than 40,000 SMEs are likely to lean on finance providers to help support their businesses. This is according to a study from fintech lender Nucleus Commercial Finance (NCF) which found that 15% of small and medium sized UK businesses expect to need a loan to support the running of their business. While just 1% of sole traders expect to have to go down this route, it rose notably to 16% among smaller businesses, employing between 50-249 staff.
Two thirds (66%) of UK SMEs are worried about the prospect of rising business costs over the next 12 months – and among small and medium sized businesses, this figure rises to 74%, with 29% of this group stating that they are ‘very worried’ about costs going up over the next year. However, just 38% of businesses say they are confident about being able to access affordable finance in the next 12 months should they need it.
It will take a collaborative approach to help a raft of businesses overcome the many challenges facing them and I make no apologies for reiterating again just how important a role the intermediary community will play in helping to source the right solutions to help them overcome these financial obstacles.