The Power Hour
From left to right: Gev Lynott, chief executive at Mansfield Building Society; Alan Cleary, managing director at Precise Mortgages; Lorenzo Satchell, divisional sales manager at Blemain Group; Dale Jannels, managing director at All Types of Mortgages; Ivan Gould, chief executive at Buckinghamshire Building Society
plan because a lot of brokers don’t deal with it every day so they don’t have to outsource it. DJ: They also don’t realise how many lenders are actually looking for that business. AC: There are far more options today that didn’t exist 12 months ago.
WHAT ARE THOSE OPTIONS? DJ: Well you’ve got three or four lenders who actively credit score in the near prime sector Precise Mortgages, GE Money Home Lending, MBS lending and Platform. Then you’ve got the likes of Cheshire and a few others that will actively look for stuff that others have declined and then you’ve got smaller lenders and building societies. You can really write the deal - it depends on risk.
DO YOU THINK THE DEMAND TO DO THAT TYPE OF LENDING MATCHES THE NUMBER OF BORROWERS WHO IT? AC: There are millions of these people, we couldn’t even touch the edges. IG: The problem is the disconnect between demand and supply and I would put that down to the quality of a mortgage broker. AC: There is a demand problem as you have people like myself who are on lifetime
36 MORTGAGE INTRODUCER MARCH 2012
trackers at 0.58% above base who won’t move house and won’t go anywhere because it’s a really good deal. If you look at the gross mortgage market from ’05 to the end of ’07, virtually a third of the market recycled itself so nearly a third of people have got a new mortgage in that period so they’re probably locked in. DJ: The near prime rates aren’t bad though. You get 80% to 85% loan to value and you get rates starting at 4.29% on a lifetime tracker.
IS PART OF THE PROBLEM THAT THIS IS STILL TABOO? DJ: It’s down to the name of it. If you call it adverse then people shy away from it but if you call it sub-prime then people gasp. So what is it? IG: I’d call them wrinkle mortgages. They’ve got wrinkles. DJ: There are so many different names. We say brokers need education but lenders need education as well. You cough against a mobile phone bill and you have a default against you and therefore the credit scoring on the high street and you’re knocked straight off. LS: It’s going to be an increasing market. In whatever guise it be whether for status or the complexity of their income, the variable appetites of markets will cause this market to increase. DJ: It’s already increasing now. January
was phenomenal for us and 85% of our business was near prime.
YOU TALKED A BIT ABOUT RATES. IS IT EXPENSIVE COMPARED TO PRE-CREDIT CRUNCH? AC: It’s cheap. Remember Bank Base was different then so you’ve got to line it all up. We were selling prime mortgages at 6% or 7% but it was a different back drop. The margin for all lenders now is better than it was back in anything from 2000 onwards because that reflects a more realistic charge for cost of credit. Credit was sold too cheap. If you look at prices now, I think the prices are really reasonable. Building societies probably have a better cost of funds than most specialist lenders and have some very nice pricing as well. It’s difficult to compare today’s pricing directly. IG: There is the funding issue and the supply issue. Everybody was in that market five years ago and now there are a lot fewer in that market. I think prices are broadly around the same despite base rates have collapsed.
DOESN’T THAT MEAN PRICES ARE TOO CHEAP? IG: Not if you borrow from me it isn’t. LS: Pricing has stabilised to the right level about now. Pricing is now dependent on
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