Mutuals make their move
Posted on 17 May 2013 by
The Building Societies Association (BSA) has revealed that mutual lenders increased their mortgage lending by 19% year-on-year, in the first three months of 2013, from £6.5billion to £7.7billion.
Market share for mutual lenders which represents 25% of the market per cent in March is up by some 3,235 cases to 30,495 mortgages approved from the same month last year. Also research from Deloitte, showed that overall lending by mutuals in 2012 reached £30.7billion which is a whopping 30% increase on 2011. Deloitte added: "we are likely to see more lending and product innovation from building societies."
In fact the building society sector is also dominating lending to first-time buyers with a third of all loans, and the good news is this figure is anticipated to grow further.
Mutual lenders are also likely to see an increase in high loan-to-value lending, and also interest-only throughout the rest of the year, having decided to stay out of the High Street Lenders 60%LTV bun fight.
So why all the shouting about these very positive figures ? Well it’s easy to forget that there are other lending options outside of “the banks” and quite often if you need a mortgage but don’t tick all the right boxes, then a trip to the high street is likely to have the words “the computer says no!” ringing in your ears. So in this scenario what do you do ?
Mutual lenders, particularly some of the smaller building societies are places where we can actually speak to an experienced underwriter to present a good business case to them and more often than not obtain a sensible decision. They can assess an individual case on its merits, for example using a ‘repayment strategy’, rather than the traditional ‘repayment vehicle’ for interest only loans.
Also, take the higher LTV market. Out of the approx 62 mortgage products for those buyers with a 5% deposit or less, 42 (68%) are provided from building societies and other mutual lenders. Forget “Help to Buy”, there are already lenders in the market, happily lending at 95% for both First Time and Next Time buyers. Melton Mowbray, Kent Reliance and Saffron to name three.
And what of Interest Only? LTVs and appetite for interest only, particularly among the high profile, high street lenders dropped dramatically with nobody wanting to be “last man standing”, so again we’ve seen the mutual sector (in the main) taking the alternative view that although no longer a core product, interest only remains an important niche, particularly where given under an advice proposition.
Most of the mutual lenders tend to be smaller regional organizations who do the majority of their lending via intermediaries, so strong relationships built on trust and quality of business are key to both sides. Many of these lenders will not be household names to the average borrower in the street, but to a broker they will have saved the day for numerous clients.
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