MMR boost helps building societies buck approvals trend

Complaints of lenders rejecting mortgage business in the wake of tough new affordability rules are a problem with major lenders only and a reported fall in approvals across the market is leading to a boom for smaller players, according to the chief executive of Hinckley and Rugby.

The regional building society, which has branches in based in Leicestershire and Warkwickshire but has a mortgage reach across whole of England and Wales, today (18 June) reported a 16 per cent increase in advances in the six months to May to £50.6m, while its mortgage pipeline also rose 16 per cent to a ‘record’ £40.4m.

This is despite mortgage applications rising a more modest 4.8 per cent to £57.3m. The biggest rise in business came from lower-risk residential mortgages below 75 per cent loan-to-value through to 9-0 per cent, which enjoyed “double-digit” growth, and in buy-to-let.

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This appears to buck a trend of falling approvals in a ‘cooling’ market in the months since the new affordability rules came into force in April.

Earlier this month research from the Royal Institution of Chartered Surveyors showed that the number of approvals across the market had fallen for the third consecutive month, and it suggested price inflation may begin to fall.

The building society’s chief executive Chris White said that it is only the largest banks having difficulty bedding in MMR process and pulling back from the market.

“The thing that has impacted us is the behaviour of other lenders who have come in and out of the market and, as a smaller player, surging business because the big players are not playing makes it challenging for us sometimes to match demand with supply.

Mr White added his firm could have processed a lot more business if it had more resources and commented that many smaller building societies have a similarly healthy pipeline becasue they have had less to do in regards to the rules.

“Because we’re not a lender that relied on a computer-based underwriting system or blackbox approach on credit assessment, we’ve always tended to underwrite the way that the MMR rules were drafted,” he explained.

“For us it hasn’t really been such a change in approach, yes we capture a little bit more infroamtion on customers expentidure patterns, but that’s the only major change.”