underwriter says yes. David is fighting back against the Goliaths of the high street. But you have to know where to go. It’s not as simple as plugging in your client’s requirements to a sourcing system. Mortgage broking is back – it requires skill, knowledge of underwriting and lenders’ risk appetites and relationships.
Broking is BaCk “In a competitive world, one where
consumers are able to see competing deals on various websites, it’s understandable that brokers will succumb to the temptation to use the cheaper mainstream lenders,” explains Alan Lakey, principal at Hertfordshire-based Highclere Financial Services. “However I find increasingly that a
stringent obedience to foolish rules and rate-driven cherry picking is making it less likely that the usual suspects will assist my clients.” Tom Cleary, financial services director at
London-based Start Financial Services, agrees. “We don’t always head for the main lenders but it is difficult bearing in mind that 92% of all residential mortgage lending is through six lenders,” he says. “The most competitive rates are only available through the big guys and that is why the smaller lenders have to offer products that are more creative.” And they are being creative, though not
necessarily by designing fancy products. More often than not it’s about using common sense to make a lending decision. “The smaller lenders offer more human
underwriting not just box ticking, which is usually more reasonable and user-friendly,” Melanie Bien, director of Private Finance, says. “They also show more willingness to understand a case and be helpful, perhaps partly because they are dealing in lower volumes and so have more time to spend. Cases tend not to be rejected out of hand which may be the case with some of the bigger lenders.” Despite this, there is still hesitance
among brokers about using the Davids of the mortgage lending world rather than just heading for the Goliaths.
Gemma Harle, managing director of
network TenetLime, says the reason brokers rely on the big lenders is because of trust. “Brokers are using the smaller players but not universally as some do not have as much confidence in more unknown lenders,” she explains. “Information about sourcing products tends to be less readily accessible. “But these lenders seem able to make
more balanced decisions on cases rather than adopting a hard and fast approach to underwriting. The product innovation is also better such as the Coventry 5-year flexible fixed product and the Clydesdale high net worth products.”
size doesn’t matter Rob Killeen, director at London-based broker Capital Fortune, says he has found it pays to consider the smaller players. “On product and on criteria, there is a
mainstream whisker between the major lenders but niche cases often can be secured by looking at the mutuals, specialist lenders and private banks,” he says. “Specialist and mutual lenders are
sometimes prepared to take a holistic rather than a tick box approach and we have successfully placed cases with the underwriter, who often doubles up as the bank manager. “It can be refreshing to obtain a decision
in principle from a vote of the full meeting of an executive committee, rather than an automated answer from a computer.” The lenders he’s referring to come in all
shapes, sizes and even nationalities. Of the plethora of smaller regional building societies and intermediary players, brokers name Accord, Aldermore, Bank of China, ING Direct, Paragon, Coventry, Kensington and Precise Mortgages as among the most willing to listen to the details of a case. Peter Williams, executive director of the
Intermediary Mortgage Lenders Association, says its members are finding the stringent credit scoring at the big six lenders offers them an opportunity. “IMLA members are clearly pitching into
the niches developing around the big six,” he says. “They’re working off the tight
scores used by them and are instead using the opportunity for fuller underwriting on borrowers. They are finding good credit risk despite these borrowers perhaps not fitting the bill for the standard lenders.” Sally Laker, managing director of
network Mortgage Intelligence, agrees. “Smaller lenders like Kensington and Precise, mutuals and foreign lenders like Bank of China are prepared to be more innovative on product and the types of borrower they’ll consider,” she says. “Brokers are using them slowly but
surely and they are very much needed to offer a bit more choice especially outside of the bog standard 60% loan to value perfect credit customer. “The volume is not there yet for some of
the newer lenders but that is a combination of pricing, access and awareness. Not all intermediaries are fully aware of the criteria and availability of funds through some of these lenders, and it takes longer in the current climate to get that awareness out there.”
know your niChes Understanding each lender’s appetite and preference is becoming increasingly important for brokers. Different lenders want different types of customer and broking deals requires insight. Nigel Stockton, financial services
director at national mortgage brokers Countrywide, says identifying those niches is key. “Kensington is building a niche market
for the self-employed,” he explains. “Some of their products need only one year’s trading accounts, compared to three for the prime lenders. They also use LTV to differentiate their proposition in the buy-to-let sector. Precise is using short-term and bridging alongside other smaller lenders to gain volume, whilst Borro is using asset-backed borrowing options.” He believes brokers should be
considering how the market fits together as a pattern of niches if they are to place the non-vanilla deals successfully. Dominik Lipnicki, director of Your
Mortgage Decisions, explains another niche is “near prime” – customers with
mortgage introducer JULY 2011 35
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