Lenders will innovate their mortgage offering now it is certain that the Help to Buy scheme will not be relaunched, it was said at The Mortgage and Protection Event (TMPE).
Speaking at the Bolton conference on Wednesday, Clare Beardmore, director of Legal and General Mortgage Club, took a question from delegates asking if lenders could do more to innovate with products to help support low-income earners, specialist schemes and limited deposit clients.
Jeremy Duncombe, director of intermediaries at Accord Mortgages, said “yes”, although there were challenges with how much lenders could lend at high loan-to-income (LTI) levels.
He pointed to Yorkshire Building Society’s recently launched £5k Deposit Mortgage, which he said helped with the deposit element. However, Duncombe added that there was still a challenge around affordability because of Prudential Regulation Authority (PRA) rules.
Duncombe said this was why he was disappointed to see the Help to Buy scheme disappear and noted he would like to see a return to a form of the scheme across all property types, not just new build, as this would help with affordability and potentially not drive up house prices.
“I’m sure every lender is looking at ways they can help first-time buyers, low-deposit, under-served borrowers,” he added.
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Emily Hollands, group head of distribution at OSB Group, said this was probably why lenders were slow to react when the Help to Buy scheme was withdrawn because there was a “hope” it would come back.
“Now that definitely isn’t happening, I think you’ll start to see lenders innovate more in that industry to replace that business,” Holland added.
Rob Barnard, relationship director at Pepper Money, said several schemes and propositions had since come to market to plug some of the gaps left by Help to Buy, noting that Pepper Money was the first specialist lender to join the First Homes scheme.
Barnard said the lender was also seeing more interest in shared ownership, adding that the scheme worked well with specialist lending. However, he said some housing associations were reluctant to accept a mortgage from a borrower using a specialist lender because of a stigma around the client base.
He added: “That disappoints me because I do seriously think it does fit beautifully with the type of client we have.
“Specialist lending is more than adverse credit, there are people who are just missing the high street that shared ownership is perfect for, so I think a bit of help there would be really good.”
Mainstream and specialist borrowers ‘blurring’
Responding to Beardmore asking if specialist borrowers were the “new norm”, Jonathan Stinton, head of intermediary relationships at Coventry Building Society, said the line between specialist and mainstream business was “becoming closer, becoming more blurred”.
“It’s really who you want to classify and pin your flag in – what is specialist? Is it adverse? Is it someone who’s only been working… three months?
“Is it self-employed? Because there will be elements of the audience who say specialist means self-employed,” Stinton added.
He encouraged brokers to “stay close to lenders” and use available technology to understand what lenders were willing to accept, as criteria were changing.
Duncombe said it may surprise some brokers to hear that mainstream lenders like Yorkshire Building Society would consider cases they might see as specialist, so brokers should try them before going to a specialist lender.
Barnard said specialist lenders complemented the high street “beautifully”, adding that the latter would always be consistent in its approach, while some mainstream lenders might tighten their appetite depending on service levels and other factors.
“We’re never going to be your plan A, we’re not, but what’s wrong with being plan B or C? So it’s great to have the back-up,” Barnard added.
Interested in attending The Mortgage and Protection Event? The conferences continue next week in Southampton (13 November) and London (14 November).
To register, click here: https://www.mortgagesolutions.co.uk/events/mortgage-protection-event/
Read more coverage from this year’s event here: TMPE2024: Rising house prices make up for static broker proc fees
