Increased competition and growing concerns over the economic climate could see specialist mortgage lenders reassess their approach to new business in 2019.
The start of the New Year saw the announcement by two lenders that they would cease new mortgage lending.
Secure Trust Bank began consultations with staff to cease new lending based on the current economic climate on January 7, while Fleet Mortgages withdrew its entire range on January 8 as the lender waits for its next funding line to be made available.
Paul McGerrigan, chief executive officer at Loan.co.uk, said: "The continued political uncertainty will present challenges for the smaller mortgage lenders.
"The fear that Brexit's impact will drag on has led to increased diligence when obtaining funding lines.
"Anyone with this model will be working a lot harder to secure ongoing funding in the short term and we could see more product lines being withdrawn temporarily in the first quarter.
“Newer entrants to the mortgage market and smaller lenders will be nervous, continually assessing their positions in the early part of 2019.
"The challengers are always at a significant disadvantage to the big mortgage lenders due to their funding structures and cost of funds. Brexit is placing more pressure on them."
According to Paul Lynam, chief executive of Secure Trust Bank, which listed on the stock market in 2016, it had "been a difficult decision to take” to consider pulling the plug on new mortgage lending.
There will be no impact on existing mortgage customers or new applications in progress during the consultation period, which is to be concluded in February.
While Fleet Mortgages does expect the funding issues to be resolved before the end of January, it has stated that all decisions in principle and applications received on January 8 will be declined.
David Hollingworth, associate director, communications at L&C Mortgages, said: "Although these announcements came in swift succession the action taken by Secure Trust and Fleet seems to be quite different.
"Fleet suggests that it’s a victim of its own success in the speed with which it’s used its funding and hopefully we will see a quick return to market.
"Secure Trust in contrast seems to be taking a longer-term approach to its withdrawal from mortgage lending but leaves the door open to a return in the future.
"Mainstream lenders are likely to consider how to broaden their proposition in a bid for improved volume, especially when pricing is so competitive. However, I don't think we should expect there to be a flurry of withdrawals and many of the specialist lenders already have well established brands and know their market well."
Shaun Church, director at Private Finance, agreed: "From our perspective, whilst it doesn’t look great that they happened it quick succession it isn’t something that is going to continue to happen.
"Secure Trust Bank’s withdrawal from the market based on increased competition and a difficult economic climate highlighted the importance for new entrants to have a strong, niche product that stands out from the crowd.
"When you look at the number of new entrants to the market and niche areas being serviced, this is bound to happen once or twice.
"Not everybody can make a success of what they are doing, as in the case of Secure Trust. Coming into that market is not easy so you have got to stand out."
Mr Hollingworth added: "With more lenders now looking to make their mark it does raise the question of whether the growth in lender numbers is hitting the high point and whether there could even be some contraction if lenders find it harder to find their niche."
Mr McGerrigan, however, suggested more effort is made to ensure the continued success of smaller, niche lenders.
He said: "It is important throughout this that every effort is made to ensure smaller niche lenders continue to increase their market share for the long term good of borrowers.
"Short term uncertainty aside the UK mortgage market is incredibly robust and I expect it to bounce back strongly once clarity returns."
Jenny Turton is a freelance reporter for FTAdviser
