After all the hype surrounding the arrival of MMR, the planet continues to spin and the sun still rises in the East. I have seen the ‘horror’ stories about the increasingly bizarre requests being made by some first charge lenders from potential borrowers in their attempts to impress the regulator with their diligence.
Frankly, I do believe we are just seeing an initial overreaction and as the new rules bed in, I am sure lenders will become more pragmatic in their interpretation of affordability. Of course, I might be wildly optimistic on this point, but this is a major change to the way in which the industry has had to assess suitability, so it is hardly surprising that there will be some bumps in the road as the market adjusts.
As far as the second charge market is concerned, there has been some moaning about the regulator ensuring that we follow the first charge example. Frankly, it is all a bit of a storm in a teacup. Second charge loans are in line to become fully regulated in 2016 and the FCA is working closely with the FLA and AFB in order to synchronise the methodology and processes in advance of that happening. In the meantime, it is unlikely that second charge lenders will need to take any lessons from their first charge peers. The approach to affordability has, particularly since the credit crunch been exemplary as can be partly evidenced by the figures released by the Finance & Leasing Association showing a 43.4% fall in second charge mortgage repossessions in Q1 2014, compared with the same period last year.
In the market, we have seen two major players in Prestige Finance and Nemo making bold statements of intent with their recent pricing announcements. Clearly, there is a strong desire to build business levels and it will be interesting to see how competitors respond. Blemain has made changes to criteria and rates on their buy-to-let product this month and it is likely that we shall see more movement from lenders in specific niche areas as lenders try to differentiate their offerings.
I would also like to point to the positive news coming from the lending industry at the moment with the announcement by Prestige Finance’ parent OneSavings Bank (OSB) that it is seeking a stock market listing. Less than five years ago, OSB did not exist, but the timing of bringing together Kent Reliance, Prestige Finance and Interbay as a group representing first charge and second charge residential lending and commercial mortgages, has been an object lesson in post credit crunch lending strategy.
Bradley Moore is head of second charge lending at Brightstar Financial
