The issue with specialist lending is not that there are no lenders willing to do it but rather that there are no investors willing to invest in it at the moment.
That’s why all the remaining lenders of this type have moved to the prime arena if possible, or ceased lending altogether.
Many are simply maintaining their infrastructure in the hope that investor funds will return.
The move towards prime lending allows any specialist mortgage to be blended into the bigger pot while allowing any mortgage-backed security to be considered prime.
When investors believe that the likelihood of serious losses has significantly reduced, the returns available will allow them to reinvest in this market.
The usual indicators in this regard are house prices indices, which are starting to look more positive, and unemployment, with which we are unable to determine what is happening.
Until specialist lenders can move this type of lending off their balance sheets they won’t be able to lend unless they obtain a banking licence and run a retail deposit operation.
Rates charged versus returns will have to be sufficiently attractive to investors to get the ball rolling so they will initially be higher than most would wish.
As an experienced and old-fashioned underwriter who is currently unemployed I have no wish to see this market constrained for any longer than it needs to be but without some form of government intervention I don’t see an early end to the situation.
Rising house prices and falling unemployment remain the only possible saving graces.