The head of a new specialist lender has taken aim at its rivals, claiming new entrants have taken the easy route to market with buy-to-let, secured and bridging loans, instead of a truly differentiated proposition serving borrowers with bad credit.
Bluestone managing director Matt Andrews said although challengers sometimes offer small tweaks to typical lending criteria, they primarily gain customers by just lowering rates, potentially “eating each others lunch” in an increasingly busy part of the market.
“FCA mortgage lending statistics prove that new entrants are avoiding adverse credit customers, so it is time that we saw healthy competition enter the market to help more borrowers improve their unique financial situations.”
Australian specialist lender Bluestone launched into the UK market in November, with a range of products designed for the self-employed and contractors who struggle to meet traditional credit checks.
He said the development of sourcing systems is vital. “These tools need to filter customers accurately in order to be able to offer the best products suited to their particular needs, especially for those with adverse credit histories or unusual financial circumstances”.
Specialist lender Magellan Homeloans entered the market in 2013. Managing director for lending Simon Read said for some the profits in less tightly regulated areas trump “being innovative or having a well-differentiated proposition”.
“Bridging, for example, is a high yielding unregulated activity that, if undertaken correctly, can also be low risk. That makes it an attractive proposition for a new lender seeking quick access to high, short-term returns.
He said: “It’s a similar story with the buy-to-let market, which in the main operates outside the FCA’s regulatory regime, offers higher margins and is easier to enter than the fully-regulated residential mortgage market.”
Alan Cleary, managing director at Precise Mortgages, said specialist lending was not necessarily about adverse lending, but more about parts of the market that are undersupplied by high street lenders, adding “in reality the adverse market is tiny”.