Mortgage industry needs new blood

Bob Hunt is chief executive of Paradigm Mortgage Services


Like any industry the mortgage market needs a constant supply of new blood in order to develop and evolve.


Whether this be graduates or school leavers considering a career in financial services, existing institutions extending their reach into home loans or fledgling brokerages being established, it is vital there is a new generation of entrants to supplement the stalwarts.


This is particularly true of the lending sector. We have seen a number fall by the wayside or swallowed up by larger organisations during the global financial crisis, which could compromise competition and choice if it continues to be a trend that remains unchecked.


For the sake of the future health of our industry, it is also to be hoped that any potential new entrants embrace the intermediary distribution model too.


Encouragingly there are some signs that lenders new to the UK mortgage market are emerging.


As well as high-profile developments like Virgin Money’s acquisition of Northern Rock, there have been other heartening signs such as the State Bank of India joining the Council of Mortgage Lenders ahead of a mooted entry into the residential market in August and players such as Portillion and Tesco biding their time ahead of potential launches.


The entrance of these new lenders can reinvigorate the market and ensure that the old guard do not become complacent, particularly if the “newbies” are offering competitive rates, strong service levels and product innovation.


It may seem like an odd time for lenders to be making their debut in the UK mortgage market, but entering during a downturn has its upsides.


For a start, public and market perception will be good as people will appreciate support for the sector and will not view these new entrants with the same suspicion they might do if they were perceived to be jumping on a bandwagon during a booming market.


There is also a “sink or swim” element to proceedings too – if you can set margins correctly and thrive in a recession, the theory is that it should be plain sailing once the economy turns the corner.


Finally the fact remains that there are less lenders and products than there were at the industry’s height pre-credit crunch, so competition shouldn’t be quite as keen as it was.


While rate rivalry has cooled somewhat over the past few years, we are starting to see keener pricing return to some extent. Loan to value ratios are gradually climbing back up, Halifax Intermediaries recently nudged its new build LTV up to 90%, and lenders are dipping their toes back into sectors they had previously pulled out of such as buy-to-let.


No-one is suggesting we return to the dark days of easy credit, but a slight relaxing of criteria from post-crisis panic levels is only a good thing for the industry as a whole.


As with lenders that have been resilient enough to survive the last couple of years, so too should brokers who have made it this far be applauded. It has felt at times like we are sprinting just to stand still, but hopefully lending and broking can be stimulated by an injection of new faces.


The percentage of mortgage business written by brokers may have diminished a little from the heady levels seen in the middle of the last decade, but with lending competition on the rise again, it seems obvious that any new entrant will want to utilise and existing broker ‘sales force’.


We’ve heard the plans and projections, now we wait with baited breath to see what the new kids in town have to offer.