In April, Atom Bank was the latest to set out its stall, aiming to offer new-build, shared ownership, contractor and self-employed mortgages, restricted to a group of selected brokers in the first phase of the launch.
Also last month, ex-Mortgages PLC boss Trevor Pothecary detailed plans to re-enter the specialist sector as chief executive of The Mortgage Lender, following Bluestone Mortgages’ entry at the end of last year.
Bluestone managing director Matt Andrews took aim at other new entrants “easy route to market” with buy-to-let, secured and bridging loans, instead of truly differentiated propositions serving borrowers with bad credit.
Packagers process applications on behalf of brokers for submission to lenders. This includes checking clients’ credit files, instructing property valuations and checking applications fit criteria. In exchange for these services, lenders pay a commission to the packager, usually shared with the broker.
Back when specialist lending was just called sub-prime, packagers were courted for their distribution muscle and ability to negotiate exclusive rates. But the financial crash tarnished the sector’s reputation, business tanked and many packagers went out of business.
Rob Jupp, chief executive of Brightstar, commented that 2016 has already been the most interesting year since 2007, with a “staggering” amount of specialist lenders entering the market.
“Even larger lenders are starting to diversify into specialist areas. Obviously the top five biggest lenders have no interest as they’re too risk averse, but for those lenders just outside the top ten - ‘the challengers’ - many are looking at things like bridging and buy-to-let to boost lending figures.”
Dale Jannels, managing director at All Types of Mortgages, said there is a huge appetite for such services again, as new lenders know they can get up and running quickly by using their pre-existing distribution setups.
“Packagers have re-established themselves as the ‘go to’ for new lenders looking to launch and requiring quick market share, as well as the ease of processing,” he stated, adding this is down to experience in presenting ready to offer cases, being able deal in all types of mortgages and having wide distribution.
“Why spend the huge costs on staffing and marketing, when a packager can cover both requirements?
“They [packagers] will tend to advertise the products on Trigold and 27Tec, market to databases and take hundreds of phone calls every day, which allows the lender to better spend their time on product innovation,” explained Mr Jannels.
Whilst not a new entrant, in April Kensington signed a partnership with All Types of Mortgages, with Mr Jannels stating the move was a chance to “rekindle relationships” with the specialist packager community.
Kensington’s head of sales and distribution Steve Griffiths said specialist distributors provide an important service for brokers who are looking for a simple way of sourcing and placing their more complex cases.
Specialist network and distributor Connect for Intermediaries also partnered with Kensington this month, with chief executive Liz Syms telling FTAdviser that there are probably more specialist products in the market now than before the crisis.
“New entrants have driven competition, with each having to find a criteria niche to gain market share. On the intermediary side they often don’t have the resources to cope with volume enquiries from every broker, so we can help filter this and offer access to a distribution database.”
Mortgage distributor 3mc was also appointed to Kensington’s packager panel recently, launching a 90 per cent loan-to-value residential mortgage with no packager fee.
Meanwhile, The Right Mortgage & Protection Network brought 3mc in to provide a specialist mortgage desk and packaging support service to its members. It is one of just a few ‘hybrid’ distributors offering mortgage intermediaries access to specialist lenders either on a direct-to-lender or a packaged basis.
peter.walker@ft.com
