The Analysis News & Opinions
Opinion
Rise in default and adverse credit criteria
Our Criteria Activity Tracker has revealed the top five most-searched criteria by brokers during January 2019, with searches for adverse credit conditions entering the top five searches in three categories. The index reveals the searches brokers
perform prior to mortgage-product sourcing. The first month of 2019 showed a high level of activity as brokers searched over 90,000 pieces of criteria from over 200 lenders to whittle down available options for their clients. Highlights from the index include the
residential sector where, for the first time, two of the top five most popular searches feature adverse credit conditions. Capital raising for debt consolidation and
unsatisfied defaults were the fourth and fifth most popular searches respectively. January is now the third month in a row
that lending to limited companies is the most searched-for criteria in the buy-to-let sector. This would support the increasing market commentary over recent months that property investors are looking to professionalise with the gap between individual and professional landlords widening. Every month seems to bring new product
and criteria innovation within the equity- release sector. In January, the most-searched criteria was
for early-repayment charges, but capital raising to purchase a buy to let entered the top five for the first time. This may suggest that borrowers are looking at buy to let as a way to release the value in their property for investment returns. The year started with a flurry of activity
both in terms of broker activity and criteria changes. There are a vast amount of changes and updates each day and feedback from brokers reveals that they are now performing multiple searches prior to each application.
Nicola Firth Chief executive, Knowledge Bank
High-street lender reveals SME pledge
TSB has launched a new ‘SME Lending Pledge’, six commitments aimed at helping small-business borrowers facing financial difficulty, in a move that it hopes will prompt other banks to follow suit. At a time when more small businesses are
struggling to survive and insolvencies are on the increase, TSB’s SME Lending Pledge sets out six key commitments that aim to provide the protection and support small businesses need in a sector that, it believes, demands more regulation. Developed with input from the All Party
Parliamentary Group (APPG) on Fair Business Banking, the SME Alliance, and the Federation of Small Businesses, the Lending Pledge commits that TSB will: l Be fair and transparent in everything they do, keeping the customer informed as to the course of action they are taking and why. l Give customers reasonable time to return their business to health. l Not raise loan margins on existing facilities if a business enters into financial difficulty. l Not default a business if it is up-to-date on its loan payments, but a valuation change impacts a covenant. l Not demand full repayment or remove an overdraft unless a business has breached its terms of lending. l Not run their business-support unit as a profit centre, and not incentivise their partners for additional income earnt on accounts in business support. On the back of launching these pledges,
TSB intends to actively campaign for the need for greater protection to be put in place for business borrowers across the industry. Richard Davies, TSB’s SME banking
director, said: “Small businesses need firm commitments to ensure they get fair treatment when they need it most. That is why we are offering a new Lending Pledge. The issues of the last decade have shown there is a need for greater protections for business borrowers, and we hope that the rest of the business-banking industry will follow suit.”
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www.CCRMagazine.com Kevin Hollinrake, co-chair of the APPG
for Fair Business Banking, added: “It is refreshing to see a financial institution breaking from the crowd and recognising the need for extending the regulatory perimeter to include business customers. “Most businesses simply do not realise
that they have very few rights when they borrow money from their bank, and we hope that these pledges will help to raise awareness of this fact.” At TSB, multi-million-pound investment programme is already underway to build new banking services for small businesses. Meanwhile, the Lending Standards Board
said in a statement: “The Standards of Lending Practice, launched in March 2017, require firms to identify and support businesses who are at risk of, or are experiencing, financial difficulty. “We are encouraged that TSB has
encapsulated in their pledge the spirit of their adherence to the standards which seek to ensure that business customers receive fair treatment and appropriate support throughout their relationship with their lender. “We are working with representatives
from our registered firms to extend the protections contained in the Standards of Lending Practice to businesses with a turnover of up to £25m. This will include a focus on business-support units and TSB’s Lending Pledge will be taken into account as this work progresses.”
March 2019
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