News Review: Specialist Prime


It’s time for lenders to listen to brokers


by Charles Haresnape, managing director, Aldermore Residential


the summer sunshine has bought with it a more optimistic outlook in the residential mortgage market. data from the council of


mortgage Lenders shows that the number of remortgages, which has always been an important sector for brokers, increased by 17% between april and may this year and is up 11% since may last year. What’s more, research


undertaken by the mortgage advice Bureau confirms that the number of remortgage applications rose by 28% between may and June, which is 6% higher than June last year. this means that remortgage applications over the first half of 2011 were 34% higher than the same period in 2010. and even when


remortgaging is taken out of the equation, maB says the total number of mortgage applications still increased by 18% between may and June and is now 31% higher than in June last year. the cmL said this positive


trend is “showing further signs of stabilisation in the housing market” and that “these stable conditions are expected to continue for the rest of the year”. i read that as a cautious thumbs-up! and, to confirm my verdict


of greater optimism, the cmL also said that “Funding market conditions appear a little more positive, for example, recent securitisation


deals suggest confidence has returned as investors regain their appetite to invest in bonds backed by mortgage assets. overall this is a positive influence on mortgage market conditions”. Which is excellent news,


because an increase in funding supply will make a real difference to the market.


Increase in supply an increase in the supply of mortgage products will also make a difference and there’s good news on that front. according to mortgage Brain, the number of products available to intermediaries increased by 4% in June, the seventh monthly increase in a row. this takes the total number


of products to just over 12,500; the highest number since april 2008. Brokers have seen lenders


move from a product position in early 2007 when they were falling over themselves to do business with intermediaries, to a position just over a year later when they were being ultra-cautious and transacting very little business with brokers, to today when lenders are starting to show renewed interest in the introducer market once again. What is curious, however,


is that the big lenders appear to have reverted to type and are slugging it out on price for market share in the sub 75%, squeaky clean, prime mortgage market. there have been some amazing limited period fire-sale style offers recently, where lenders have been cutting margin to win market share. as nigel Stockton of


20 mortgage introducer AUGUST 2011


countrywide commented:


recently “Shared


aspiration for lenders tends to lead to margin burn and it’s getting confusing… if i were still in lending, i’d be looking at prime niches, unusual term and LtV combinations and remortgaging in defined LtV bands.” i couldn’t agree more. it


seems strange that some lenders have opted to compete against each other in the already well served low LtV prime market, when there are more profitable niches crying out for greater product innovation and competition. Perhaps the lenders involved would like to provide Mortgage Introducer with an explanation of what’s behind their strategic thinking?


“It seems strange that some lend- ers have opted to compete against each other on the already well served low LTV prime market”


Niche products What brokers really need are more products designed to serve more profitable niches, such as buy-to-let and, as nigel pointed out, sectors where unusual terms and LtV combinations can make a real difference. these sectors, which should also include first-time buyers, are all under-served markets. and if lenders are


scratching their heads wondering where those opportunities may exist, the


best way for them to find out is to go and speak to brokers. i’ve always been a firm believer in listening to those people who earn their living at the coalface, because they’re tuned-in to the needs of borrowers and understand where profitable market gaps exist with significant pent-up demand. We’ve been listening hard


at aldermore over the past few weeks and have been using broker feedback as a key part of our product development programme. What’s fascinating is that this process rarely results in a eureka moment which produces a “never thought of before” new product (do such things exist in the mortgage market?). it leads instead to a series of subtle criteria changes which, when applied to existing products, make a monumental difference (perhaps i’ve just let the cat out of the bag - keep a close eye on aldermore’s product criteria over the coming weeks and you may be pleasantly surprised by what you see!). i always smile when i


hear someone say they’ve got the perfect solution to the problems faced by house buyers (like grant Shapps’ recent “mates mortgage” idea), because life is rarely that easy. the future health of the housing and mortgage markets will depend on lenders working hard at product development and being able to deliver deals which make a real difference. and that process starts with listening to the people who sell the products we manufacture.


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