Think of it what you will, sub-prime business is still booming. Just weeks after Datamonitor reports that the size of the non-standard market has decreased to one in five of the population, Mortgage Strategy can confirm that Lloyds TSB is to make its mark on the market through its retail branch network.
We revealed back in July 2002 that Lloyds TSB was looking to tap into the sector. Now, the high street lender has confirmed that it will pilot a scheme in around 70 of its Lloyds TSB and Cheltenham & Gloucester branches in the key areas of the South-East, North-West and East Midlands.
As we exclusively report on page 4, Lloyds TSB is one of the few high street names yet to make a claim on this lucrative market and it will do so with the help of Preferred Mortgages and Kensington Mortgage Company. It may seem like an unlikely group, but as Simon Biddle, marketing and communications manager for Preferred Mortgages, says: “We were on a beauty parade of lenders and were selected from the shortlist.”
Pundits say Lloyds TSB wants to create a specialist new business operation that will be able to generate profitable mortgage volume from this niche sector.
Secretly, many mainstream lenders have been taking on what would be regarded as traditional sub-prime business on a case-by-case basis, meaning this is not as new an area of the market for mainstream lenders as some may think.
Lloyds TSB spokesman Emile Abu-Shakra says: “There is clearly a growing market there and we are testing it, both to see if we can develop our business and to improve our offering to clients. We are piloting a referral procedure with Kensington Mortgages and Preferred Mortgages, drawing on their experience, to see if this is the best method of entry.”
Other high street players in the market – Abbey National through First National Mortgage Company and Halifax through BM Solutions – have yet to go as far as to offer their products direct. They'll be paying close attention to developments at Lloyds TSB, as will other players in the market.
Lloyds TSB says that it will investigate opportunities for extending any non-standard development to intermediaries pending the success of the pilot.
As we have said on these pages before, with more than 50% of mortgage business introduced from IFAs and advisers, they can't afford not to.