Specialist mortgage lending continues to increase

Specialist lenders have witnessed the total value of their lending increase to £17bn per year in 2016 – more than a three-fold increase from the low base of £5bn recorded in 2009.

The report suggests that specialist lenders are now in a position of strength following the market’s turbulent past and are effectively catering for the growing number of ‘non-standard’ borrowers in the UK who fall outside mainstream lenders’ criteria.

Specialist lenders first came to prominence in the 1980s in the wake of the financial deregulation enacted by the Thatcher government.

Their growth since the financial crisis is largely a result of serving niche market segments that have received proportionally less attention from mainstream lenders – and whose appetite to deviate away from lending to ‘standard’ borrowers was reduced via the tougher regulation introduced in the wake of the financial crisis.

Mortgage lending by specialist lenders

Four key products have influenced specialist lenders’ business during these growth years: buy-to-let mortgages, specialist residential mortgages, bridging loans and second charge mortgages have all been dominated by specialist lenders since the recession.

“Specialist lenders have enjoyed strong growth since the end of the recession, largely through their focus on classically niche, less well-served areas of the market,” said Peter Williams, executive director of IMLA.

“Through innovation and flexibility, combined with strong underwriting standards, specialist lenders have capitalised on the growing demand for products like specialist residential and lifetime mortgages.

“There is strong evidence to suggest that specialist lenders can now break the cycle that has defined the segment in the past.”