Specialist lending will return, says TFC Homeloans

TFC Homeloans, the specialist distributor, believes that the backed-up demand for mortgages for non-conforming applicants will spark a revival of the specialist mortgage market.

Following last week’s announcement from Kensington that it will consider lending to applicants with CCJs and defaults, many commentators – Kensington included – have been quick to quell discussion of any prospect of a return to lending to applicants with adverse credit.

TFC Homeloans feels a revival in this sector is inevitable though, as growing demand from borrowers and advisers alike will lead lenders back to specialist lending.

Andy Brown, managing partner of TFC Homeloans, says: “Undoubtedly times have changed, but the concept of supply and demand has not, and there’s no doubt there’s demand in the market for adverse credit mortgages.

“Pragmatic underwriting approaches– rather than the clinical, automated, ‘me too’ approaches of old – can ensure risk-based pricing and deliver decent returns for forward thinking lenders.

“Specialist products such as Sale and Rent Back are now providing an option for some borrowers who might previously have taken heavy adverse mortgages, and short-term finance is an increasingly popular option for those looking to repair their credit.

“But between the quasi-prime criteria of Kensington’s welcome new proposition and these specialist products there remain huge gaps, with massive demand which is currently untapped.

“Where there’s clear profit potential, funding will become available, and hopefully sooner rather than later.”

Julian Wells, co-founder of Marketing Innovation Forum and previously head of marketing at specialist lender Mortgages plc, says nature abhors a vacuum, and product developers like nothing more than innovating to fill gaps.

He says: “The recession will leave people with impaired credit records for years to come, just like it did in the 90’s, but with the recovery many of those same people are getting back on their feet and will be eager to own their homes again or remortgage.

“It’s great there are now more diverse product sets available, but many are niche areas, and the traditional specialist market is not being serviced. It seems inevitable that it will return, and who’s to say that Kensington’s move won’t prove the catalyst for other developments in 2010?”