Brokers have been urged to branch out into specialist lending as a way to diversify against falls in mortgage activity.
Encouraging brokers to “embrace” specialist lending, Rob Barnard, director of intermediaries at Masthaven, a specialist lender, said: “I think brokers now won’t just rely on mortgage business; they won’t just rely on product transfer business. Because they’ve had a period here right at the heart of the lockdown where there wasn’t a great deal of mortgage business about”.
Statistics from the Bank of England show approvals for purchase mortgages reached 40,000 in June, up from the record low of 9,300 in May, but still below a pre-Covid level in February of 73,700.
Mr Barnard added: “One area that we found that was rebounding quicker than any was bridging. And we found that brokers wanted to find out more about the bridging sector.”
He continued: “Make sure that you’re not just dependent on mortgage business, so if this ever happened again, you’ve got more strings to your bow”.
Anthony Rose, director at LDNfinance, said his firm had seen a “large increase” in clients who required a bridge, or thought it might be their “only option”.
Jamie Lewis, managing director at Affinity Mortgages, which also offers advice on bridging loans, said his firm launched a specialist lending arm in 2018 after packagers and master brokers did not meet their expectations.
Mr Lewis said: “We noticed that we as a broker were being asked for more than mortgage broking and were merrily delivering these clients to a third party business that maybe had a different working ethic to ours where the client will always come first”.
Additionally, Masthaven’s Mr Barnard predicted a change in demand for specialist lenders. He said: “Lots of people’s financial circumstances have been radically affected by the crisis. Small business owners, the self-employed, people who’ve been furloughed or who have had to take a mortgage payment holiday may all now be prospective customers for specialist lenders”.
Carl Shave, director at Just Mortgage Brokers, agreed that in the current financial and economic climate, cases previously regarded as “vanilla” were no longer necessarily as straightforward.
Likewise, LDNfinance’s Mr Rose said that the financial implications of the coronavirus for certain clients had “highlighted the need to be able to look at the full range of options, ranging from the most vanilla high street solutions all the way to the most complex bridging or private bank mortgage”.
Clayton Shipton, managing director at CLS Money, also agreed with Mr Barnard, and warned that some clients may not look elsewhere if they were unable to find a mortgage through an adviser with limited specialist knowledge.
Mr Shipton added: “It shouldn’t come down to a lottery of picking the right broker - every broker should be educated in prime and specialist lenders”.