Distributors and packagers face a bright future over the next five years. So says Phil Jenks, head of specialist lending at Halifax Bank of Scotland.
Jenks predicts the specialist market will show the greatest level of growth over the next few years, accounting for 30% of the total UK mortgage market by 2011. He says that the sub-prime market will grow to more than £26bn and the buy-to-let market will be as large at the first-time buyer market by the same time.
“The reality is, it is the specialist market that has driven all of the growth in the market since 2001 and it is the part of the market that will sustain it between 2007 and 2011. And there is no reason why packagers can’t be successful in the marketplace, because they are trading in those parts of the market that are showing the most growth,” he says.
Jenks says the main reason why distributors should feel confident about their place in the market is because lenders such as HBOS have recognised the importance of packagers as a distribution channel.
He says: “The market actually favours the business models of distributors, subject to them controlling their costs overall in the marketplace.
“As a big lender, we will support packagers with access to distribution. We don’t see them as anything other than a key distribution source. And the economics say distributors represent the part of the market which is growing.”
Not only will the specialist market remain strong but HBOS believes more and more niches will emerge, offering further opportunities for packagers to develop expertise and offer services to brokers. Niches that are likely to emerge include equity share and self-build products. And while they will move into the mainstream market over the next couple of years as well, they are two areas where Jenks believes distributors should be taking the initiative in providing help and support to brokers who are likely to know very little about them.
Meanwhile, he says lenders are also beginning to respond to the changes in the buy-to-let sector with more innovative product design and better criteria. He says the buy-to-let market is fragmenting, enabling distributors to add value to brokers by using their expertise in specialist markets.
Jenks says: “Although there are concerns around portfolios in buy-to-let, all I can say ” There is no reason why packagers can’t be successful – they are trading in those parts of the market that are showing the most growth”is HBOS is very confident in this sector and, if we could, we would back an even greater share in the buy-to-let market. Investor confidence is massive and all the research says investors are going to hold onto a property for 10 years, so it is not a short-term investment. Virtually every investor that has any real portfolio of properties – so more than three – is confident in the market and is