New lenders are good for consumers

The specialist market has seen a large number of lender entrants in the past couple of years. These have been either completely new lenders or brands created by established lenders as specialist offerings.

This trend has been driven by two factors. First, lenders are eager to explore areas where there is more margin due to the competitive nature of the mainstream sector.

Second, there is an expectation that the specialist sector will grow in terms of volume – a notion clearly backed up by the continued success of buy-to-let.

Also, specialist sectors are now being seen as a better bet in terms of risk profile. Many buy-to-let books are performing better than mainstream businesses and while there are no guarantees this will continue, it’s an attractive proposition that has seen buy-to-let rates tumble.

The sub-prime sector has seen a flood of interest and lenders that would have screwed up their noses at the mention of adverse lending a few years ago are now courting that business.

No longer is it the domain of a select band of sub-prime specialist lenders. Even some smaller mutuals have entered the market. Lenders such as the Derbyshire and Scarborough have set up subsidiaries in the shape of Salt and Scarborough Specialist Mortgages respectively to handle this kind of business.

Coventry is the latest lender to launch a brand which will sit alongside the mutual brand – Godiva. But Godiva is not bringing a new suite of products to market and will be the channel for the distribution of MOREgage, Coventry’s successful high LTV, buy-to-let, self-cert and impaired credit products.

This is a strategic move to allow Coventry more flexibility to extend its scope in specialist areas. Any assertion that this is yet another entrant into an already crowded market is therefore untrue as these products are already established. And in any case, I can see no problem with more lenders looking to attract more business in specialist markets.

From brokers’ point of view, more competition brings more choice for clients and thus better products. It is a broker’s job to monitor the market to assess which lenders offer the best propositions. While there are bound to be losers among lenders, brokers and their clients should win.