New survey shows importance of specialist lenders
More than 1.5 million homes across the UK – around 6% of the country's 28 million residential properties – fail to meet mainstream lenders' criteria and are effectively locked out of standard mortgage finance, according to research from specialist lender Together.
The properties include thatched cottages, high-rise flats, homes situated too close to commercial premises, and those without a functioning kitchen or bathroom. Together's research found that 21% of buyers have had a mortgage application rejected outright, while 32% found themselves working with a significantly smaller pool of lenders willing to even consider their case.
Despite this, appetite for these properties hasn't gone away. Together's survey found 31% of buyers were drawn to them as renovation projects, 28% saw an opportunity to add value and resell, and lower purchase prices were the main attraction for 28% overall, rising to 32% among those buying as a main residence. Rental income potential drew in another 35% buying as buy-to-let investments.
Ryan Etchells (pictured right), chief commercial officer at Together, said the properties don't show up in official housing shortage figures but "represent part of the wider supply problem." He added that a significant number of homes are effectively out of reach for ordinary buyers, even though many of them are otherwise habitable and in desirable locations.
This isn't the only corner of the market where the gap between what buyers want and what mainstream lenders will fund is widening. Mortgage Introducer has previously reported that up to 37% of flats in England and Wales could be unmortgageable purely because their service charges exceed the 1% of property value threshold many lenders won't go beyond – a separate but related squeeze on affordable stock.
For brokers, this is exactly the kind of case where specialist lenders earn their fee. Together itself has built its business around precisely these properties: as Mortgage Introducer's guide to the lender explains, it accepts high-rise flats, ex-council homes, non-standard construction and unusual conversions that would be declined elsewhere, provided the security stacks up. It's part of a wider trend – as brokers told Mortgage Introducer last year, specialist lending has been filling gaps the high street can't for some time, and Together's own market forecasts point to further growth in demand for exactly this kind of case.
With 1.5 million properties effectively frozen out of mainstream lending, and clients still keen to buy them, knowing which specialist lenders will look past the things a computer-driven decision engine won't could be the difference between a case that completes and one that falls through.
