New lenders have been criticised for pushing credit limits in an attempt to gain ground in a saturated market.
On the first day of Mortgage Strategy’s Packaging Summit in Nice, France, members of an expert panel warned about the dangers of some of the products offered by new lenders.
Peter Beaumont, deputy chief executive of Merill Lynch’s Mortgages PLC, says: “There are too many new lenders entering the market without the necessary experience and analytics to understand the long term risk.
“It is a fact that arrears are a lot higher amongst those lenders who have pushed the credit envelope too far.”
Nigel Payne, managing director of HBOS brand, The Mortgage Business, says: “Too many new lenders have not figured out the risk and reward values where their high risk products are concerned.”
However, John Prust, director of sales and marketing at Lehman Brothers – which owns Preferred, Southern Pacific Mortgage Limited and LMC – argues that all lenders are well aware of the potential pitfalls of pushing credit boundaries.
He says: “It is condescending to lecture lenders about the perils of pushing credit boundaries.
“It is obvious to anyone that this may not be successful, and it is especially obvious to the people running these mortgage lenders, who are intelligent management professionals. I fully welcome any new lenders onto the market.”