Darlington Building Society’s professionals mortgage, which launched in November, is not the first time that we have seen a lender target the professional sector, and I am sure it will not be the last.
In fact, we could see more lenders look to develop products that appeal to this part of the market as competition drives lenders to look for areas that allow them to offer something a bit different.
Professional is something of a generic term, but in most cases will be limited to very specific occupations. In the case of Darlington BS, it is targeted at those that are qualified, practicing and registered as an accountant, actuary, barrister, dentist, engineer, medical doctor, optometrist, pharmacist, solicitor, or veterinarian.
That will clearly narrow the field, but the rate is certainly not priced to be one that immediately catches the eye.
The product is a five-year fixed rate at 3.69 per cent to 90 per cent loan-to-value and carries a £499 product fee.
Five-year fixed rates for those with a 10 per cent deposit can be found with much lower interest rates. For example, First Direct currently offers a five-year fix at 2.25 per cent with a £490 booking fee.
However, this product is much more about the kind of criteria approach that Darlington BS can offer, rather than seeking to draw professional candidates in with teaser rates. This type of applicant carries some appeal for a lender, given their career path is likely to be solid and structured with good earning potential.
That opens the opportunity for lenders to employ a more flexible and individualised approach to the underwriting of these cases. Darlington is therefore offering the ability to lend as much as six times income to these borrowers.
Other products, such as the Clydesdale deal for newly qualified professionals, take a similar approach, offering as much as 5.5 times income to 95 per cent LTV.
Of course, there has been some critical coverage of this approach and lenders have been accused of loosening criteria and stretching loan-to-income caps. However, this product naturally focuses on a niche area and will be subject to overarching underwriting to establish affordability.
This strikes me as a measured approach to offer a degree of flexibility where it is more likely to be appropriate. Limiting availability to a certain type of borrower helps target that approach rather than signal a lowering of lending standards more generally.
David Hollingworth is associate director, communications at London & Country Mortgages
