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New entrants must bring fresh ideas

I was surprised to read recently that the Financial Services Authority had received 28 applications for new lenders entering the market in 2006. I can only think of six – and most of those aren’t bringing anything exciting to the table.

Many of the new entrants may not be innovative but over the past six months their arrival will have caused a lot of head-scratching in the boardrooms of existing lenders.

Directors have to consider how to counter the competitive threat they pose, their me-too offers notwithstanding.

What should existing lenders do? Do they invest in new strategies and up their game? Do they try to fill their boots with new lending before the entrants launch? Do they carry on regardless and hope the whole new entrant thing doesn’t come to much, ostrich-style?

In fact, the reaction we have seen so often that it’s become something of a phenomenon is a move into specialist lending by mainstream lenders and a move into the mainstream by specialist lenders. They’re all trying to become one-stop-shops – the Shangri-la of mortgage lending.

In their desperation to become one-stop shops lenders are using a variety of tactics, some more sound than others. In fact,some of their strategies look positively flaky.

Executives who aren’t quite sure what they are getting into try referral schemes or pilots. These approaches are born out of weakness and a lack of faith in sub-par propositions designed to minimise risk in case of failure – if it doesn’t work, make sure we can get out quick.

At edeus, we believe a one-stop-shop offers significant benefits to brokers and lenders. After all, the wider the product range the better chance of placing a deal and the more brokers you are likely to attract.

If one lender could provide loans to everyone from the super-rich right along the credit-curve to heavy sub-prime – capturing self-certification and buy-to-let in its various forms along the way – it would be the closest to a one-stop shop of any.

The prize for the new entrants to the lending market is to grab market share, but in such a competitive market only those that bring something new to the table will reach the heights.


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