Predicting the market is becoming more like a science project. Lending has become akin to dealing with a finely tuned instrument and if just one of those strings snap, everything changes. The market has been very buoyant and intermediaries have been working 24/7 to make the most of the number of applications coming in and also ensuring they deliver the best service to their clients.
However, there is an underlying feeling of fragility where there has been so much change, plus regular comment with ever- changing predictions, such as the base rate moving up, house prices overheating and comment on how the housing market is cooling in London. In addition to this, we have certain lenders key to specific areas and making some sectors dependent on a small number of lenders. If one has to pull out or pull back that could become a broken string and significantly impact the market.
Take the new-build sector for example. There are two prominent lenders in that sector – Nationwide and Halifax – and they have been the stalwarts of that sector. It is not just about rate and criteria, it is the expertise that gives brokers confidence that the lender will process the case efficiently, if the applicant meets the criteria. Speed is the key and that refers to the broker and the lender. It is not a market for the faint hearted; it is a full-time commitment to both the client and the developer, in addition to managing the lender relationship. Despite trying to persuade other lenders to move into this space on a bigger scale, they appear reticent to turn on the tap. There is a raft of lenders that offer a new build proposition with some excellent features but we do need them to offer a wider proposition, as this market is growing and is primarily key to first-time buyers.
Product transfers have been a superb success for Lloyds and it has proved the model works. Again, no other lender has replicated product transfers on the scale Lloyds has, which is a shame as it is clearly an excellent way of retaining the back book and utilising intermediary advice. Although, it would be fair to say that other lenders have a retention offering but there are still a number of key lenders that are not in this space and I hope now they are looking at retention that might change.
In the buy-to-let space there are two main contenders – TMW and BMS. However, Coventry and Natwest have also taken a strong position here, with others moving up the table, including Santander and Virgin Money. With buy-to-let it is about appetite rather than systems, service and expertise. Obviously with the European Credit Directive news that “accidental landlords” will be regulated, we have yet to decide the impact that will have and whether we end up with a broken string.
Service levels are the classic broken string and, in some cases, the impact of one lender in trouble can create a similar problem for other lenders. We know what happens if a lender stands out at the top of the sourcing systems, it creates a domino effect until the right level is reached. Good service often leads to future referrals.
The last quarter of this year is going to be interesting, as lenders’ appetite for more business is still strong. If the product ranges and the service levels remain intact we have a good chance of no broken strings.