Controlled distribution is key in the modern mortgage market, argues Guy Garrard, head of business development at Tiuta
When assessing the specialist markets, at the moment it is difficult to look beyond the buy-to-let sector in terms of exposure. Whilst bridging finance remains very solid and the commercial sector is relatively stable, it is the buy-to-let sector that is currently experiencing the highest profile, certainly within the intermediary trade press at least. The news that the team at Exact has launched a broker-only lender called Precise Mortgages has certainly helped in this exposure.
It has been announced that the new provider will focus on high-quality loans and prime customers, and offer up to 75% LTV. It will initially offer buy-to-let mortgages this is a move that comes hot on the heels of Kensington’s recent foray into buy-to-let and the official opening of the doors of Aldermore, each of which have helped to give this sector a welcome boost.
Specialist buy-to-let lender Paragon also posted a pre-tax profit of £29.3 million for the six months to March 31 as the company continues to prepare to return to new lending. It announced that pre-tax profits are up 84.3% compared to the same period last year when profits were £15.9 million.
These announcements are particularly a shot in the arm for the intermediary arena as these are all firms that are fully committed to the broker market which has to be a positive for all concerned.
Add these to recent statistics from Moneyfacts suggesting that the number of buy-to-let mortgages has grown 70% since the market’s lowest point in September 2009 and it appears that the buy-to-let market is certainly moving in the right direction after arguably being one of the worst hit areas of the market as a result of the credit crunch.
The Moneyfacts report outlines that in September 2009 some 95% of all buy-to-let deals that were available at the peak of the market in August 2007 had been withdrawn. But that the number of buy-to-let products available as at May 19 reached 304, an increase of 125 products over the last eight months.
Rates at higher LTVs also seem to be improving with products at up to 80% LTV accounting for 4.24% of buy-to-let deals in May, compared to just 1.4% in September. The average two-year fixed rate deal has dropped to 5.66% from the 5.96% rate in September, with the average two-year tracker at 4.49% from 4.59% over the same period. This data points to an increase in competition.
Looking at this competition, another thing these new lenders also have in common is the emphasis that they have placed on the controlled distribution of these products. This is quite possibly the key element in the modern mortgage market. When, where and in what volume products are distributed must not be underestimated and amidst some remaining financial curtailments it has to be an area of concern for all those providers looking to enter a new or existing space. It is pleasing to see that has obviously been carefully considered as relationships and trust continue to play a major part in how lenders go about setting up their distribution channels.
As suggested volumes can be a problem – depending upon the size of the tranche – as can levels of service. In the so-called ‘good old’ days a new product would have been rolled out to the whole of market or as an exclusive through a particular distributor. And whilst this generally worked to gain market share, inevitably a more cautious approach is now called for in both the pricing for, who will have access to the product and through which channel. Because of this sensible ‘toe in the water’ approach these new lenders will not dramatically re-align the buy-to-let horizon overnight but what great news it is that they have arrived at all and lets hope they are the first of many.